Volatility and Liquidity Costs Staff Working Paper 2013-29 Selma Chaker Observed high-frequency prices are contaminated with liquidity costs or market microstructure noise. Using such data, we derive a new asset return variance estimator inspired by the market microstructure literature to explicitly model the noise and remove it from observed returns before estimating their variance. Content Type(s): Staff research, Staff working papers Research Topic(s): Econometric and statistical methods, Financial markets, Market structure and pricing JEL Code(s): C, C1, C14, C5, C51, C58, G, G2, G20
Bank Runs, Portfolio Choice, and Liquidity Provision Staff Working Paper 2019-37 Toni Ahnert, Mahmoud Elamin After the financial crisis of 2007–09, many jurisdictions introduced new banking regulations to make banks more resilient and less likely to fail. These regulations included tighter limits for the quality and quantity of bank capital and introduced minimum standards for liquidity. But what was the impact of these changes? Content Type(s): Staff research, Staff working papers Research Topic(s): Financial stability, Wholesale funding JEL Code(s): G, G0, G01, G2, G21
Testing the Parametric Specification of the Diffusion Function in a Diffusion Process Staff Working Paper 2005-35 Fuchun Li A new consistent test is proposed for the parametric specification of the diffusion function in a diffusion process without any restrictions on the functional form of the drift function. Content Type(s): Staff research, Staff working papers Research Topic(s): Econometric and statistical methods, Interest rates JEL Code(s): C, C1, C12, C14
The Distributional Origins of the Canada-US GDP and Labour Productivity Gaps Staff Working Paper 2024-49 James (Jim) C. MacGee, Joel Rodrigue We find the top 10% of the income distribution accounts for three-quarters of the gap in GDP per adult between Canada and the United States. The large gaps in income for high-income earners help distinguish between alternative explanations of this persistent gap in GDP per adult. Content Type(s): Staff research, Staff working papers Research Topic(s): Productivity JEL Code(s): D, D3, D31, E, E2, E24, J, J2, J24, J6, J61, N, N1, N12, O, O4, O47, O5, O51
A Note on Central Counterparties in Repo Markets Staff Discussion Paper 2012-4 Hajime Tomura The author introduces a central counterparty (CCP) into a model of a repo market. Without the CCP, there exist multiple equilibria in the model. In one of the equilibria, a repo market emerges as bond dealers and cash investors choose to arrange repos in an over-the-counter bond market. Content Type(s): Staff research, Staff discussion papers Research Topic(s): Financial markets, Financial stability, Payment clearing and settlement systems JEL Code(s): G, G2, G24
Composite Likelihood Estimation of an Autoregressive Panel Probit Model with Random Effects Staff Working Paper 2019-16 Kerem Tuzcuoglu Modeling and estimating persistent discrete data can be challenging. In this paper, we use an autoregressive panel probit model where the autocorrelation in the discrete variable is driven by the autocorrelation in the latent variable. In such a non-linear model, the autocorrelation in an unobserved variable results in an intractable likelihood containing high-dimensional integrals. Content Type(s): Staff research, Staff working papers Research Topic(s): Credit risk management, Econometric and statistical methods, Economic models JEL Code(s): C, C2, C23, C25, C5, C58, G, G2, G24
February 21, 2025 Tariffs, structural change and monetary policy Remarks Tiff Macklem Mississauga Board of Trade-Oakville Chamber of Commerce Mississauga, Ontario Governor Tiff Macklem discusses the potential impact of a trade conflict with the United States. He also launches the review of the Bank’s monetary policy framework. Content Type(s): Press, Speeches and appearances, Remarks Research Topic(s): Economic models, Housing, Inflation targets, International topics, Monetary policy and uncertainty, Monetary policy framework, Potential output, Productivity, Recent economic and financial developments, Trade integration
Cyber Risk and Security Investment Staff Working Paper 2022-32 Toni Ahnert, Michael Brolley, David Cimon, Ryan Riordan We develop a principal-agent model of cyber-attacking with fee-paying clients who delegate security decisions to financial platforms. We derive testable implications about clients’ vulnerability to cyber attacks and about the fees charged. Content Type(s): Staff research, Staff working papers Research Topic(s): Economic models, Financial services, Financial stability, Financial system regulation and policies, Payment clearing and settlement systems JEL Code(s): D, D7, D78, D8, D81, G, G1, G18, G2, G21, G23
December 8, 2011 Financial System Review - December 2011 In this issue of the Financial System Review, the Bank of Canada’s Governing Council judges that the risks to the stability of Canada’s financial system are high and have increased markedly over the past six months, owing primarily to an escalation of the sovereign debt crisis in the euro area and a weaker global economic outlook. Erratum: The data for Chart 7 on page 8 were plotted incorrectly. See revised chart. Content Type(s): Publications, Financial Stability Report
May 17, 2012 Inflation Targeting: The Recent International Experience Bank of Canada Review - Spring 2012 Robert Lavigne, Rhys R. Mendes, Subrata Sarker In the years since the 2006 renewal of Canada’s inflation-control agreement, monetary policy regimes have faced significant shocks, including the global economic and financial crisis. This article reviews the recent experience with inflation targeting, including the debate about the appropriate role of monetary policy in maintaining financial stability. In the aftermath of the crisis, both […] Content Type(s): Publications, Bank of Canada Review articles Research Topic(s): Credibility, Financial stability, Inflation targets, Monetary policy framework JEL Code(s): E, E3, E31, E5, E52, E58