Credit Risk Transfer and Bank Insolvency Risk Staff Working Paper 2017-59 Maarten van Oordt The present paper shows that, everything else equal, some transactions to transfer portfolio credit risk to third-party investors increase the insolvency risk of banks. This is particularly likely if a bank sells the senior tranche and retains a sufficiently large first-loss position. Content Type(s): Staff research, Staff working papers Research Topic(s): Credit risk management, Financial institutions, Financial stability JEL Code(s): G, G2, G21, G28, G3, G32
Who Pays? CCP Resource Provision in the Post-Pittsburgh World Staff Discussion Paper 2017-17 Jorge Cruz Lopez, Mark Manning At the Pittsburgh Summit in 2009, G20 countries announced their commitment to clear all standardized over-the-counter (OTC) derivatives through central counterparties (CCPs). Since then, CCPs have become increasingly important and there has been an extensive program of regulatory enhancements to both them and OTC derivatives markets. Content Type(s): Staff research, Staff discussion papers Research Topic(s): Financial markets, Financial stability, Financial system regulation and policies JEL Code(s): G, G0, G01, G2, G28
Financial Development Beyond the Formal Financial Market Staff Working Paper 2018-49 Lin Shao This paper studies the effects of financial development, taking into account both formal and informal financing. Using cross-country firm-level data, we document that informal financing is utilized more by rich countries than poor countries. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial markets, Firm dynamics, Productivity JEL Code(s): E, E4, E44, O, O1, O17, O4, O47
A Further Analysis of Exchange Rate Targeting in Canada Staff Working Paper 1994-2 Robert Amano, Tony S. Wirjanto In a recent paper Mercenier and Sekkat (1988) conclude that the Bank of Canada has followed a policy of exchange rate targeting using the money supply. We re-examine their results using a different estimation approach and with different assumptions about the forcing process of the exogenous variables. Content Type(s): Staff research, Staff working papers Research Topic(s): Exchange rates
Multilateral Adjustment and Exchange Rate Dynamics: The Case of Three Commodity Currencies Staff Working Paper 2007-41 Jeannine Bailliu, Ali Dib, Takashi Kano, Lawrence L. Schembri In this paper, we empirically investigate whether multilateral adjustment to large U.S. external imbalances can help explain movements in the bilateral exchange rates of three commodity currencies – the Australian, Canadian and New Zealand (ACNZ) dollars. Content Type(s): Staff research, Staff working papers Research Topic(s): Econometric and statistical methods, Exchange rates JEL Code(s): C, C1, C11, C2, C22, F, F3, F31, F32
The Transmission of Shocks to the Chinese Economy in a Global Context: A Model-Based Approach Staff Working Paper 2010-17 Jeannine Bailliu, Patrick Blagrave To better understand the dynamics of the Chinese economy and its interaction with the global economy, the authors incorporate China into an existing model for the G-3 economies (i.e., the United States, the euro area, and Japan), paying particular attention to modelling the exchange rate and monetary policy in China. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Economic models, Exchange rate regimes, International topics JEL Code(s): E, E3, E32, E5, E52, F, F4, F41
Emergency Liquidity Facilities, Signalling and Funding Costs Staff Working Paper 2015-44 Céline Gauthier, Alfred Lehar, Héctor Pérez Saiz, Moez Souissi In the months preceding the failure of Lehman Brothers in September 2008, banks were willing to pay a premium over the Federal Reserve’s discount window (DW) rate to participate in the much less flexible Term Auction Facility (TAF). We empirically test the predictions of a new signalling model that offers a rationale for offering two different liquidity facilities. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial institutions, Financial stability, Lender of last resort JEL Code(s): G, G0, G01, G2, G21, G28
Canada’s Monetary Policy Report: If Text Could Speak, What Would It Say? Staff Analytical Note 2019-5 André Binette, Dmitri Tchebotarev This note analyzes the evolution of the narrative in the Bank of Canada’s Monetary Policy Report (MPR). It presents descriptive statistics on the core text, including length, most frequently used words and readability level—the three Ls. Although each Governor of the Bank of Canada focuses on the macroeconomic events of the day and the mandate of inflation targeting, we observe that the language used in the MPR varies somewhat from one Governor’s tenure to the next. Content Type(s): Staff research, Staff analytical notes Research Topic(s): Central bank research, Monetary policy JEL Code(s): E, E0, E02, E5, E52
Ambiguity, Nominal Bond Yields and Real Bond Yields Staff Working Paper 2018-24 Guihai Zhao Equilibrium bond-pricing models rely on inflation being bad news for future growth to generate upward-sloping nominal yield curves. We develop a model that can generate upward-sloping nominal and real yield curves by instead using ambiguity about inflation and growth. Content Type(s): Staff research, Staff working papers Research Topic(s): Asset pricing, Financial markets, Interest rates JEL Code(s): E, E4, E43, G, G0, G00, G1, G12
Capital Structure, Pay Structure and Job Termination Staff Working Paper 2016-12 Jason Allen, James R. Thompson We develop a model to analyze the link between financial leverage, worker pay structure and the risk of job termination. Contrary to the conventional view, we show that even in the absence of any agency problem among workers, variable pay can be optimal despite workers being risk averse and firms risk neutral. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial institutions, Labour markets JEL Code(s): G, G2, G24, J, J3, J33