Price-Level versus Inflation Targeting with Financial Market Imperfections Staff Working Paper 2008-26 Francisco Covas, Yahong Zhang This paper compares price-level-path targeting (PT) with inflation targeting (IT) in a sticky-price, dynamic, general equilibrium model augmented with imperfections in both the debt and equity markets. Content Type(s): Staff research, Staff working papers Research Topic(s): Economic models, Inflation targets, Monetary policy framework JEL Code(s): E, E4, E40, E5, E50
Good Policies or Good Fortune: What Drives the Compression in Emerging Market Spreads? Staff Working Paper 2008-25 Philipp Maier, Garima Vasishtha Since 2002, spreads on emerging market sovereign debt have fallen to historical lows. Given the close links between sovereign spreads, capital flows to emerging markets, and economic growth, understanding the factors driving these spreads is very important. We address this issue in two stages. Content Type(s): Staff research, Staff working papers Research Topic(s): Development economics, Financial stability, International topics JEL Code(s): E, E4, E43, F, F3, F34, G, G1, G12, G15
Do Central Banks Respond to Exchange Rate Movements? Some New Evidence from Structural Estimation Staff Working Paper 2008-24 Wei Dong This paper investigates the impact of exchange rate movements on the conduct of monetary policy in Australia, Canada, New Zealand and the United Kingdom. We develop and estimate a structural general equilibrium two-sector model with sticky prices and wages and limited exchange rate pass-through. Content Type(s): Staff research, Staff working papers Research Topic(s): Exchange rates, International topics, Monetary policy framework JEL Code(s): F, F3, F4
On the Amplification Role of Collateral Constraints Staff Working Paper 2008-23 Caterina Mendicino Following the seminal contribution of Kiyotaki and Moore (1997), the role of collateral constraints for business cycle fluctuations has been highlighted by several authors and collateralized debt is becoming a popular feature of business cycle models. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Credit and credit aggregates JEL Code(s): E, E2, E20, E3, E32
Information Shocks, Jumps, and Price Discovery - Evidence from the U.S. Treasury Market Staff Working Paper 2008-22 George Jiang, Ingrid Lo, Adrien Verdelhan We examine large price changes, known as jumps, in the U.S. Treasury market. Using recently developed statistical tools, we identify price jumps in the 2-, 3-, 5-, 10-year notes and 30-year bond during the period of 2005-2006. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial markets JEL Code(s): G, G1, G12, G14
The Cost of Equity in Canada: An International Comparison Staff Working Paper 2008-21 Jonathan Witmer This paper calculates an implied cost of equity for 19 developed countries from 1991 to 2006. During this period, there has been a decline in the cost of equity of about 10-15 bps per year, which can be partially attributed to declining government yields and declining inflation. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial markets, International topics JEL Code(s): G, G3, G30, G38
The Effect of the Sarbanes-Oxley Act on CEO Pay for Luck Staff Working Paper 2008-20 Teodora Paligorova According to the rent-extraction hypothesis, weak corporate governance allows entrenched CEOs to capture the pay-setting process and benefit from events outside of their control – get paid for luck. Content Type(s): Staff research, Staff working papers Research Topic(s): Labour markets JEL Code(s): G, G3, G38, J, J3, J33, M, M5, M52
Inflation, Nominal Portfolios, and Wealth Redistribution in Canada Staff Working Paper 2008-19 Césaire Meh, Yaz Terajima There is currently a policy debate on potential refinements to monetary policy regimes in countries with low and stable inflation such as the U.S. and Canada. For example, in Canada, a systematic review of the current inflation targeting framework is underway. Content Type(s): Staff research, Staff working papers Research Topic(s): Inflation and prices, Inflation targets, Inflation: costs and benefits, Monetary policy framework, Sectoral balance sheet JEL Code(s): D, D3, D31, D5, D58, E, E3, E31, E5, E50
Empirical Likelihood Block Bootstrapping Staff Working Paper 2008-18 Jason Allen, Allan Gregory, Katsumi Shimotsu Monte Carlo evidence has made it clear that asymptotic tests based on generalized method of moments (GMM) estimation have disappointing size. The problem is exacerbated when the moment conditions are serially correlated. Content Type(s): Staff research, Staff working papers Research Topic(s): Econometric and statistical methods JEL Code(s): C, C1, C14, C2, C22
Policy Coordination in an International Payment System Staff Working Paper 2008-17 James Chapman Given the increasing interdependence of both financial systems and attendant payment and settlement systems a vital question is what form should optimal policy take when there are two connected payment systems with separate regulators. Content Type(s): Staff research, Staff working papers Research Topic(s): Exchange rate regimes, Payment clearing and settlement systems JEL Code(s): E, E4, E42, E5, E58, F, F3, F31, F33