Risk Premium, Variance Premium and the Maturity Structure of Uncertainty Staff Working Paper 2012-11 Bruno Feunou, Jean-Sébastien Fontaine, Abderrahim Taamouti, Roméo Tedongap Expected returns vary when investors face time-varying investment opportunities. Long-run risk models (Bansal and Yaron 2004) and no-arbitrage affine models (Duffie, Pan, and Singleton 2000) emphasize sources of risk that are not observable to the econometrician. Content Type(s): Staff research, Staff working papers Research Topic(s): Asset pricing, Financial services JEL Code(s): G, G1, G12, G13
Monetary Policy Transmission, Bank Market Power, and Wholesale Funding Reliance Staff Working Paper 2023-35 Amina Enkhbold I study how banking market concentration and reliance on wholesale funding affect monetary policy transmission to mortgage rates. I find that this transmission is imperfect and dampens the response of consumption, output, and housing prices. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial institutions, Inflation targets, Monetary policy transmission, Wholesale funding JEL Code(s): E, E4, E44, E5, E52, G, G2, G21
Avoiding the Pitfalls: Can Regime-Switching Tests Detect Bubbles? Staff Working Paper 1996-11 Simon van Norden, Robert Vigfusson Work on testing for bubbles has caused much debate, much of which has focussed on methodology. Monte Carlo simulations reported in Evans (1991) showed that standard tests for unit roots and cointegration frequently reject the presence of bubbles even when such bubbles are present by construction. Evans referred to this problem as the pitfall of testing for bubbles. Content Type(s): Staff research, Staff working papers Research Topic(s): Econometric and statistical methods JEL Code(s): C, C2, C22, C5, C52
Speculative Behaviour, Regime-Switching and Stock Market Crashes Staff Working Paper 1996-13 Simon van Norden, Huntley Schaller This paper uses regime-switching econometrics to study stock market crashes and to explore the ability of two very different economic explanations to account for historical crashes. The first explanation is based on historical accounts of "manias and panics." Content Type(s): Staff research, Staff working papers Research Topic(s): Financial markets JEL Code(s): C, C4, C40, E, E4, E44, G, G1, G12
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
June 11, 2015 Financial System Review - June 2015 The Reports section of the Financial System Review examines selected issues of relevance to the Canadian and global financial systems. The June 2015 issue features two reports summarizing recent work by Bank of Canada staff on specific financial sector policies. Content Type(s): Publications, Financial Stability Report
A Tale of Two Countries: Cash Demand in Canada and Sweden Staff Discussion Paper 2019-7 Walter Engert, Ben Fung, Björn Segendorf Cash use for payments has been steadily decreasing in many countries, including Canada and Sweden. This might suggest an evolution toward a cashless society. But in Canada, cash in circulation relative to GDP has been stable for decades and has even increased in recent years. By contrast, the cash-to-GDP ratio in Sweden has been falling steadily. What has caused this difference? Are there lessons to be learned from comparing the Canadian and Swedish experiences? Content Type(s): Staff research, Staff discussion papers Research Topic(s): Bank notes, Digital currencies and fintech, Financial services, Payment clearing and settlement systems JEL Code(s): E, E4, E41, E42, E5
How Do Households Respond to Expected Inflation? An Investigation of Transmission Mechanisms Staff Working Paper 2024-44 Janet Hua Jiang, Rupal Kamdar, Kelin Lu, Daniela Puzzello We conduct surveys to study how consumer spending responds to higher inflation expectations. Most respondents spend the same, sticking to fixed budget plans or not considering inflation for spending decisions. About 20% decrease spending because they feel poorer and cut spending to invest in inflation-proof assets. Very few increase spending. Content Type(s): Staff research, Staff working papers Research Topic(s): Central bank research, Inflation and prices, Inflation targets, Monetary policy, Monetary policy transmission JEL Code(s): D, D1, D15, D8, D84, E, E2, E5, E52, E7
A Practical Guide to Swap Curve Construction Staff Working Paper 2000-17 Uri Ron The swap market has enjoyed tremendous growth in the last decade. With government issues shrinking in supply and increased price volatilities, the swap term structure has emerged as an alternative pricing, benchmark, and hedging mechanism to the government term structure. Content Type(s): Staff research, Staff working papers Research Topic(s): Asset pricing, International financial markets JEL Code(s): G, G1, G12, G15
Grasping De(centralized) Fi(nance) Through the Lens of Economic Theory Staff Working Paper 2022-43 Jonathan Chiu, Charles M. Kahn, Thorsten Koeppl We analyze the value proposition and limitations of decentralized finance (DeFi). Based on a distributed ledger and smart contracts, DeFi can guarantee the execution of financial contracts, potentially lowering the costs of intermediation and improving financial inclusion. Content Type(s): Staff research, Staff working papers Research Topic(s): Digital currencies and fintech, Payment clearing and settlement systems JEL Code(s): G, G2