Are Wealth Effects Important for Canada? Staff Working Paper 2003-30 Lise Pichette, Dominique Tremblay The authors examine the link between consumption and disaggregate wealth in Canada. They use a vector-error-correction model in which permanent and transitory shocks are identified using the restrictions implied by cointegration proposed by King, Plosser, Stock, and Watson (1991) and Gonzalo and Granger (1995). Content Type(s): Staff research, Staff working papers Topic(s): Domestic demand and components JEL Code(s): C, C3, C32, E, E2, E21
Nominal Rigidities and Exchange Rate Pass-Through in a Structural Model of a Small Open Economy Staff Working Paper 2003-29 Steve Ambler, Ali Dib, Nooman Rebei The authors analyze exchange rate pass-through in an estimated structural model of a small open economy that incorporates three types of nominal rigidity (wages and the prices of domestically produced and imported goods) and eight different structural shocks. The model is estimated using quarterly data from Canada and the United States. Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Economic models, Exchange rates, Inflation and prices, International topics JEL Code(s): F, F2, F3, F31, F33
An Empirical Analysis of Liquidity and Order Flow in the Brokered Interdealer Market for Government of Canada Bonds Staff Working Paper 2003-28 Chris D'Souza, Charles Gaa, Jing Yang The authors empirically measure Canadian bond market liquidity using a number of indicators proposed in the literature and detail, for the first time, price and trade dynamics in the Government of Canada secondary bond market. They find, consistent with Inoue (1999), that the Canadian brokered interdealer fixed-income market is relatively liquid for its size. Content Type(s): Staff research, Staff working papers Topic(s): Financial markets, Market structure and pricing JEL Code(s): G, G1, G10, G14
Monetary Policy in Estimated Models of Small Open and Closed Economies Staff Working Paper 2003-27 Ali Dib The author develops and estimates a quantitative dynamic-optimizing model of a small open economy (SOE) with domestic and import price stickiness and capital-adjustment costs. A monetary policy rule allows the central bank to systematically manage the short-term nominal interest rate in response to deviations of inflation, output, and money growth from their steadystate levels. Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Exchange rates, Monetary policy transmission JEL Code(s): E, E3, E31, E5, E52, F, F2, F3
Measuring Interest Rate Expectations in Canada Staff Working Paper 2003-26 Grahame Johnson Financial market expectations regarding future policy actions by the Bank of Canada are an important input into the Bank's decision-making process, and they can be measured using a variety of sources. The author develops a simple expectations-based model to focus on measuring interest rate expectations that are implied by the current level of money market yields. Content Type(s): Staff research, Staff working papers Topic(s): Financial markets, Interest rates JEL Code(s): G, G1
Income Trusts - Understanding the Issues Staff Working Paper 2003-25 Michael R. King An income trust is an investment vehicle that distributes cash generated by a set of operating assets in a tax-efficient manner. The market capitalization of income trusts has grown rapidly over the past two years, reaching $45 billion at year-end 2002. Content Type(s): Staff research, Staff working papers Topic(s): Financial markets JEL Code(s): G, G1, G12, G3
Essays on Financial Stability Technical Report No. 95 John Chant, Alexandra Lai, Mark Illing, Fred Daniel The four essays published here provide a useful overview for anyone interested in understanding the issues and policy environment surrounding financial system stability. Content Type(s): Staff research, Technical reports Topic(s): Financial institutions, Financial markets JEL Code(s): G, G2, G28
Forecasting and Analyzing World Commodity Prices Staff Working Paper 2003-24 René Lalonde, Zhenhua Zhu, Frédérick Demers The authors develop simple econometric models to analyze and forecast two components of the Bank of Canada commodity price index: the Bank of Canada non-energy (BCNE) commodity prices and the West Texas Intermediate crude oil price. They present different methodologies to identify transitory and permanent components of movements in these prices. Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods JEL Code(s): C, C5
What Does the Risk-Appetite Index Measure? Staff Working Paper 2003-23 Miroslav Misina Explanations of changes in asset prices as being due to exogenous changes in risk appetite, although arguably controversial, have been popular in the financial community and have also received some attention in attempts to account for recent financial crises. Operational versions of these explanations are based on the assumption that changes in asset prices can be decomposed into a part that can be attributed to changes in riskiness and a part attributable to changes in risk aversion, and that some quantitative measure can capture these effects in isolation. Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Financial markets JEL Code(s): G, G1, G12
The Construction of Continuity-Adjusted Monetary Aggregate Components Staff Working Paper 2003-22 Jeannie Kottaras Changes in the financial industry result in new data that are inconsistent with the former presentation, and therefore adjustments are required to "adjust" or smooth out these breaks to establish continuity. Content Type(s): Staff research, Staff working papers Topic(s): Monetary aggregates JEL Code(s): E, E5, E51