Macroprudential Rules and Monetary Policy when Financial Frictions Matter Staff Working Paper 2012-6 Jeannine Bailliu, Césaire Meh, Yahong Zhang This paper examines the interaction between monetary policy and macroprudential policy and whether policy makers should respond to financial imbalances. To address this issue, we build a dynamic general equilibrium model that features financial market frictions and financial shocks as well as standard macroeconomic shocks. Content Type(s): Staff research, Staff working papers Research Topic(s): Economic models, Financial markets, Financial stability, Monetary policy framework JEL Code(s): E, E4, E42, E5, E50, E6, E60
Why Is Cash (Still) So Entrenched? Insights from the Bank of Canada’s 2009 Methods-of-Payment Survey Staff Discussion Paper 2012-2 Carlos Arango, Dylan Hogg, Alyssa Lee The authors present key insights from the Bank of Canada’s 2009 Methods-of-Payment survey. In the survey, about 6,800 participants completed a questionnaire with detailed information regarding their personal finances, as well as their use and perceptions of different payment methods. Content Type(s): Staff research, Staff discussion papers Research Topic(s): Bank notes, Financial services JEL Code(s): D, D1, D12, E, E4, E41, L, L8, L81
An International Dynamic Term Structure Model with Economic Restrictions and Unspanned Risks Staff Working Paper 2012-5 Gregory Bauer, Antonio Diez de los Rios We construct a multi-country affine term structure model that contains unspanned macroeconomic and foreign exchange risks. The canonical version of the model is derived and is shown to be easy to estimate. Content Type(s): Staff research, Staff working papers Research Topic(s): Asset pricing, Exchange rates, Interest rates JEL Code(s): E, E4, E43, F, F3, F31, G, G1, G12, G15
Price Competition and Concentration in Search and Negotiation Markets: Evidence from Mortgage Lending Staff Working Paper 2012-4 Jason Allen, Robert Clark, Jean-François Houde This paper examines the impact of bank consolidation on mortgage rates in order to evaluate the extent to which mortgage markets are competitive. Mortgage markets are decentralized and so rates are determined through a search and negotiation process. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial institutions, Financial services, Interest rates JEL Code(s): G, G2, L, L1
Fooled by Search: Housing Prices, Turnover and Bubbles Staff Working Paper 2012-3 Brian Peterson his paper develops and estimates a model to explain the behaviour of house prices in the United States. The main finding is that over 70% of the increase in house prices relative to trend during the increase of house prices in the United States from 1995 to 2006 can be explained by a pricing mechanism where market participants are ‘Fooled by Search.’ Content Type(s): Staff research, Staff working papers Research Topic(s): Asset pricing, Business fluctuations and cycles JEL Code(s): E, E3, R, R2, R21
A Foreign Activity Measure for Predicting Canadian Exports Staff Discussion Paper 2012-1 Louis Morel The author constructs a measure of foreign activity that takes into account the composition of foreign demand for Canadian exports. It has a number of interesting features. Content Type(s): Staff research, Staff discussion papers Research Topic(s): Balance of payments and components, Exchange rates, Recent economic and financial developments JEL Code(s): E, E0, E00, F, F1, F17
Time-Varying Effects of Oil Supply Shocks on the U.S. Economy Staff Working Paper 2012-2 Christiane Baumeister, Gert Peersman We use vector autoregressions with drifting coefficients and stochastic volatility to investigate how the dynamic effects of oil supply shocks on the U.S. economy have changed over time. We find a substantial decline in the short-run price elasticity of oil demand since the mid-eighties. Content Type(s): Staff research, Staff working papers Research Topic(s): Econometric and statistical methods, International topics JEL Code(s): E, E3, E31, E32, Q, Q4, Q43
Real-Time Analysis of Oil Price Risks Using Forecast Scenarios Staff Working Paper 2012-1 Christiane Baumeister, Lutz Kilian Recently, there has been increased interest in real-time forecasts of the real price of crude oil. Standard oil price forecasts based on reduced-form regressions or based on oil futures prices do not allow consumers of forecasts to explore how much the forecast would change relative to the baseline forecast under alternative scenarios about future oil demand and oil supply conditions. Content Type(s): Staff research, Staff working papers Research Topic(s): Econometric and statistical methods, International topics JEL Code(s): C, C5, C53, E, E3, E32, Q, Q4, Q43
A Model of the EFA Liabilities Staff Discussion Paper 2011-11 Francisco Rivadeneyra, Oumar Dissou The authors describe the liabilities model of the Exchange Fund Account (EFA). The EFA is managed using an asset-liability matching framework that requires currency and duration matching of both sides of the balance sheet. Content Type(s): Staff research, Staff discussion papers Research Topic(s): Debt management, Foreign reserves management JEL Code(s): G, G1, G12, G3, G32
Bank Leverage Regulation and Macroeconomic Dynamics Staff Working Paper 2011-32 Ian Christensen, Césaire Meh, Kevin Moran This paper assesses the merits of countercyclical bank balance sheet regulation for the stabilization of financial and economic cycles and examines its interaction with monetary policy. Content Type(s): Staff research, Staff working papers Research Topic(s): Economic models, Financial institutions, Financial system regulation and policies, Monetary policy framework, Monetary policy transmission JEL Code(s): E, E4, E44, E5, E52, G, G2, G21