Testing Linear Factor Pricing Models with Large Cross-Sections: A Distribution-Free Approach Staff Working Paper 2010-36 Sermin Gungor, Richard Luger We develop a finite-sample procedure to test the beta-pricing representation of linear factor pricing models that is applicable even if the number of test assets is greater than the length of the time series. Our distribution-free framework leaves open the possibility of unknown forms of non-normalities, heteroskedasticity, time-varying correlations, and even outliers in the asset returns. Content Type(s): Staff research, Staff working papers Research Topic(s): Econometric and statistical methods, Financial markets JEL Code(s): C, C1, C12, C14, C3, C33, G, G1, G11, G12
Credit Risk and Collateral Demand in a Retail Payment System Staff Discussion Paper 2016-16 Héctor Pérez Saiz, Gabriel Xerri The recent financial crisis has led to the development of new regulations to control risk in designated payment systems, and the implementation of new credit risk management standards is one of the key issues. In this paper, we study various credit risk management schemes for the Canadian retail payment system (ACSS) that are designed to cover the exposure of a defaulting member. Content Type(s): Staff research, Staff discussion papers Research Topic(s): Econometric and statistical methods, Financial stability, Payment clearing and settlement systems JEL Code(s): C, C5, C58, G, G2, G21, G23
Opaque Assets and Rollover Risk Staff Working Paper 2016-17 Benjamin Nelson, Toni Ahnert We model the asset-opacity choice of an intermediary subject to rollover risk in wholesale funding markets. Greater opacity means investors form more dispersed beliefs about an intermediary’s profitability. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial institutions, Financial stability JEL Code(s): G, G0, G01, G2
What Does Structural Analysis of the External Finance Premium Say About Financial Frictions? Staff Working Paper 2019-38 Jelena Zivanovic I use a structural vector autoregression (SVAR) with sign restrictions to provide conditional evidence on the behavior of the US external finance premium (EFP). The results indicate that the excess bond premium, a proxy for the EFP, reacts countercyclically to supply and monetary policy shocks and procyclically to demand shocks. Content Type(s): Staff research, Staff working papers Research Topic(s): Economic models, Financial markets, Recent economic and financial developments JEL Code(s): E, E3, E32, E4, E44
August 15, 2013 Monitoring Short-Term Economic Developments in Foreign Economies Bank of Canada Review - Summer 2013 Russell Barnett, Pierre Guérin The Bank of Canada uses several short-term forecasting models for the monitoring of key foreign economies - the United States, the euro area, Japan and China. The design of the forecasting models used for each region is influenced by the level of detail required, as well as the timeliness and volatility of data. Forecasts from different models are typically combined to mitigate model uncertainty, and judgment is applied to the model forecasts to incorporate information that is not directly reflected in the most recent indicators. Content Type(s): Publications, Bank of Canada Review articles Research Topic(s): Business fluctuations and cycles JEL Code(s): E, E3, E37
Identifying Aggregate Shocks with Micro-level Heterogeneity: Financial Shocks and Investment Fluctuation Staff Working Paper 2020-17 Xing Guo This paper identifies aggregate financial shocks and quantifies their effects on business investment based on an estimated DSGE model with firm-level heterogeneity. On average, financial shocks contribute only 3% of the variation in U.S. public firms’ aggregate investment. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Firm dynamics JEL Code(s): E, E1, E12, E2, E22, G, G3, G31, G32
Analyzing the house price boom in the suburbs of Canada’s major cities during the pandemic Staff Analytical Note 2022-7 Louis Morel We assess how location affects house prices in Canada. The gap in prices between suburbs and downtown was closing gradually before the pandemic. The gap has been closing faster since spring 2020. This finding reflects a shift in preferences toward more living space. Content Type(s): Staff research, Staff analytical notes Research Topic(s): Asset pricing, Coronavirus disease (COVID-19), Financial stability, Housing JEL Code(s): R, R2, R21, R23, R3, R32
Sluggish Forecasts Staff Working Paper 2018-39 Monica Jain Given the influence that agents’ expectations have on key macroeconomic variables, it is surprising that very few papers have tried to extrapolate agents’ “true” expectations directly from the data. This paper presents one such approach, starting with the hypothesis that there is sluggishness in inflation and real GDP growth forecasts. Content Type(s): Staff research, Staff working papers Research Topic(s): Econometric and statistical methods, Inflation and prices JEL Code(s): E, E3, E31, E37
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
February 8, 2018 At the Crossroads: Innovation and Inclusive Growth Remarks Carolyn A. Wilkins G7 Symposium on Innovation and Inclusive Growth Montebello, Quebec Senior Deputy Governor Carolyn A. Wilkins discusses technological progress and how policy-makers can harness it for economic growth that benefits everyone. Content Type(s): Press, Speeches and appearances, Remarks Research Topic(s): Central bank research, International topics, Labour markets, Market structure and pricing, Productivity, Recent economic and financial developments