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In the interbank market, banks will sometimes trade below the central bank's deposit rate. We explain this anomaly using a theory based on market frictions and relationship lending.

The network pattern of financial linkages is important in many areas of banking and finance. Yet bilateral linkages are often unobserved, and maximum entropy serves as the leading method for estimating counterparty exposures.

An essential element of the Bank of Canada's inflation-targeting framework is a floating exchange rate that is free to adjust in response to shocks that affect the Canadian and world economies. This floating rate plays an important role in the transmission mechanism for monetary policy. A practical question is how the Bank of Canada incorporates currency movements into the monetary policy decision-making process. Only after determining the cause and persistence of exchange rate change, and its likely net effect on aggregate demand, can the Bank decide on the appropriate policy response to keep inflation low, stable, and predictable. Ragan reviews the need to target inflation and the transmission mechanism for monetary policy, including the role of the exchange rate, before describing two types of exchange rate movements and their implications for monetary policy.

This paper presents a model of an over-the-counter bond market in which bond dealers and cash investors arrange repurchase agreements (repos) endogenously.

The purpose of this study is to test the hypothesis that inflation uncertainty increases at higher levels of inflation. Our analysis is based on the generalized autoregressive conditional heteroscedasticity (GARCH) class of models, which allow the conditional variance of the error term to be time-varying. Since this variance is a proxy for inflation uncertainty, a positive relationship between the conditional variance and inflation would be interpreted as evidence that inflation uncertainty increases with the level of inflation.

This paper studies how financial shocks shape the distribution of output growth by introducing a quantile-augmented vector autoregression (QAVAR), which integrates quantile regressions into a structural VAR framework. The QAVAR preserves standard shock identification while delivering flexible, nonparametric forecasts of conditional moments and tail risk measures for gross domestic product.

This paper examines the implications of positive news about future asset values that turn out to be incorrect at a later date in an open economy model with banking. The model captures the patterns of bank credit and current account dynamics in Spain between 2000 and 2010. The model finds that the use of unconventional policies leads to a milder bust.

This paper uses a rich set of microeconomic labour market data—the 1988­90 Labour Market Activity Survey published by Statistics Canada—to test whether there is negative duration dependence in unemployment spells. It updates and extends similar work carried out by Jones (1995) who used the 1986­87 Labour Market Activity Survey.

The prevalence of entrepreneurs, particularly low-productivity non-employers, declines as economies develop. This decline is more pronounced for women. Relative to men, women are more likely to be entrepreneurs in poor economies but less likely in rich economies.

In two recent papers, Jensen (2002) and Walsh (2003), using a hybrid New Keynesian model, demonstrate that a regime that targets either nominal income growth or the change in the output gap can effectively replicate the outcome under commitment and hence reduce the size of the stabilization bias.