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1010
result(s)
Cross-border Mergers and Hollowing-out
Staff Working Paper 2009-30
Oana Secrieru,
Marianne Vigneault
The purpose of our paper is to examine the profitability and social desirability of both domestic and foreign mergers in a location-quantity competition model, where we allow for the possibility of hollowing-out of the target firm. We refer to hollowing-out as the situation where the target firm is shut down following a merger with a domestic or foreign acquirer.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Economic models,
International topics,
Market structure and pricing
JEL Code(s):
D,
D4,
D43,
G,
G3,
G34,
L,
L1,
L13,
L4,
L41
Bond Liquidity Premia
Staff Working Paper 2009-28
Jean-Sébastien Fontaine,
René Garcia
Recent asset pricing models of limits to arbitrage emphasize the role of funding conditions faced by financial intermediaries. In the US, the repo market is the key funding market. Then, the premium of on-the-run U.S. Treasury bonds should share a common component with risk premia in other markets.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Financial markets,
Financial stability
JEL Code(s):
E,
E4,
E43,
H,
H1,
H12
Consumption, Housing Collateral, and the Canadian Business Cycle
Staff Working Paper 2009-26
Ian Christensen,
Paul Corrigan,
Caterina Mendicino,
Shin-Ichi Nishiyama
Using Bayesian methods, we estimate a small open economy model in which consumers face limits to credit determined by the value of their housing stock. The purpose of this paper is to quantify the role of collateralized household debt in the Canadian business cycle.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Business fluctuations and cycles,
Credit and credit aggregates,
Monetary policy transmission
JEL Code(s):
E,
E2,
E21,
E3,
E32,
E4,
E44,
E5,
E52,
R,
R2,
R21
Credit Constraints and Consumer Spending
Staff Working Paper 2009-25
Kimberly Beaton
This paper examines the relationship between aggregate consumer spending and credit availability in the United States. The author finds that consumer spending falls (rises) in response to a reduction (increase) in credit availability.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Credit and credit aggregates,
Domestic demand and components,
Recent economic and financial developments
JEL Code(s):
E,
E2,
E21,
E27,
E4,
E44,
E5,
E51,
E58
September 11, 2009
Bank of Canada Liquidity Actions in Response to the Financial Market Turmoil
In response to the financial crisis of 2007-09, the Bank of Canada intervened repeatedly to stabilize the financial system and limit the repercussions of the crisis on the Canadian economy. This article reviews the extraordinary liquidity measures taken by the Bank during this period and the principles that guided the Bank's interventions. A preliminary assessment of the term liquidity facilities provided by the Bank suggests that they were an important source of liquidity support for some financial institutions and, on a broader basis, served to reduce uncertainty among market participants about the availability of liquidity, as well as helping to promote a return to well-functioning money markets.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Financial institutions,
Financial markets,
Financial stability
September 11, 2009
Understanding Corporate Bond Spreads Using Credit Default Swaps
Corporate bond spreads worldwide have widened markedly since the beginning of the credit crisis in 2007. This article examines default and liquidity risk–the main components of the corporate bond spread–for Canadian firms that issue bonds in the U.S. market, focusing in particular on their evolution during the credit crisis. They find that, during this period, the liquidity component increased more for speculative-grade bonds than it did for investment-grade bonds, consistent with a "flight-to-quality" phenomenon. An important implication of their results for policy-makers seeking to address problems in credit markets is that the liquidity risk in corporate spreads for investment and speculative bonds behaves differently than the default risk, especially during crisis episodes.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Econometric and statistical methods,
Financial markets,
Financial stability
September 11, 2009
Agency Conflicts in the Process of Securitization
Recent evidence finds a positive association between the prevalence of loans of inferior quality and the growth in securitized products. Some attribute this development to the lack of incentives for originators to screen and monitor the performance of securitized loans; others stress that certain factors, such as balance-sheet management, also contributed to the problem, making it difficult to pin down the reason for the proliferation of such loans during the period of high securitization growth. The author reviews the conflicts of interest between participants in the securitization process that contributed to the ongoing financial turmoil and highlights the most recent policy measures and potential solutions for ameliorating these agency issues.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Financial institutions,
Financial markets
Short Changed? The Market's Reaction to the Short Sale Ban of 2008
Staff Working Paper 2009-23
Louis Gagnon,
Jonathan Witmer
Do short sales restrictions have an impact on security prices? We address this question in the context of a natural experiment surrounding the short sale ban of 2008 using a comprehensive sample of Canadian stocks cross-listed in the U.S.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Financial markets,
International topics
JEL Code(s):
F,
F3,
F30,
G,
G0,
G01,
G1,
G18,
G2,
G20
A Financial Conditions Index for the United States
Staff Discussion Paper 2009-11
Kimberly Beaton,
René Lalonde,
Corinne Luu
The financial crisis of 2007–09 has highlighted the importance of developments in financial conditions for real economic activity. The authors estimate the effect of current and past shocks to financial variables on U.S. GDP growth by constructing two growthbased financial conditions indexes (FCIs) that measure the contribution to quarterly (annualized) GDP growth from financial conditions.
Content Type(s):
Staff research,
Staff discussion papers
Topic(s):
Business fluctuations and cycles,
Monetary and financial indicators,
Monetary conditions index,
Recent economic and financial developments
JEL Code(s):
E,
E3,
E32,
E4,
E44,
E47,
E5,
E51