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November 25, 2016

Bank of Canada announces finalists for the second annual Governor’s Challenge

NOTE TO EDITORS: This press release has been revised to reflect the new date of the final round of The Governor’s Challenge, 4 February 2017.

The Bank of Canada announced the finalists for the 2016–17 edition of The Governor’s Challenge, a student competition in which teams simulate the role of advisor to the Bank’s Governing Council.
Content Type(s): Press, Press releases Source(s): The Governor's Challenge
August 16, 2012

Global Risk Premiums and the Transmission of Monetary Policy

An important channel in the transmission of monetary policy is the relationship between the short-term policy rate and long-term interest rates. Using a new term-structure model, the authors show that the variation in long-term interest rates over time consists of two components: one representing investor expectations of future policy rates, and another reflecting a term-structure risk premium that compensates investors for holding a risky asset. The time variation in the term-structure risk premium is countercyclical and largely determined by global macroeconomic conditions. As a result, long-term rates are pushed up during recessions and down during times of expansion. This is an important phenomenon that central banks need to take into account when using short-term rates as a policy tool.
Content Type(s): Publications, Bank of Canada Review articles JEL Code(s): E, E4, E43, F, F3, F31, G, G1, G12, G15
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