Do Survey Expectations of Stock Returns Reflect Risk Adjustments? Staff working paper 2019-11 Klaus Adam, Dmitry Matveev, Stefan Nagel Motivated by the observation that survey expectations of stock returns are inconsistent with rational return expectations under real-world probabilities, we investigate whether alternative expectations hypotheses entertained in the literature on asset pricing are consistent with the survey evidence. Content Type(s): Staff research, Staff working papers JEL Code(s): G, G1, G10, G12 Research Theme(s): Financial markets and funds management, Market functioning, Market structure, Models and tools, Econometric, statistical and computational methods, Economic models
Limiting Sender’s Information in Bayesian Persuasion Staff working paper 2019-10 Shota Ichihashi This paper studies how the outcome of Bayesian persuasion depends on a sender’s information. I study a game in which, prior to the sender’s information disclosure, the designer can restrict the most informative signal that the sender can generate. Content Type(s): Staff research, Staff working papers JEL Code(s): D, D8, D82, D83 Research Theme(s): Models and tools, Economic models, Monetary policy, Monetary policy framework and transmission
Inflation Targeting and Liquidity Traps Under Endogenous Credibility Staff working paper 2019-9 Cars Hommes, Joep Lustenhouwer Policy implications are derived for an inflation-targeting central bank, whose credibility is endogenous and depends on its past ability to achieve its targets. This is done in a New Keynesian framework with heterogeneous and boundedly rational expectations. Content Type(s): Staff research, Staff working papers JEL Code(s): C, C6, C62, E, E3, E32, E5, E52 Research Theme(s): Models and tools, Economic models, Monetary policy, Inflation dynamics and pressures, Monetary policy framework and transmission
The Distributional Effects of Conventional Monetary Policy and Quantitative Easing: Evidence from an Estimated DSGE Model Staff working paper 2019-6 Stefan Hohberger, Romanos Priftis, Lukas Vogel This paper compares the distributional effects of conventional monetary policy and quantitative easing (QE) within an estimated open-economy DSGE model of the euro area. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E4, E44, E5, E52, F, F4, F41 Research Theme(s): Models and tools, Economic models, Monetary policy, Monetary policy framework and transmission, Monetary policy tools and implementation
Corporate Debt Composition and Business Cycles Staff working paper 2019-5 Jelena Zivanovic Based on empirical evidence, I propose a dynamic stochastic general equilibrium model with two financial sectors to analyze the role of corporate debt composition (bank versus bond financing) in the transmission of economic shocks. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E3, E32, E4, E44 Research Theme(s): Financial system, Household and business credit, Models and tools, Economic models, Monetary policy, Monetary policy framework and transmission, Real economy and forecasting
Limited Commitment, Endogenous Credibility and the Challenges of Price-level Targeting Staff working paper 2018-61 Gino Cateau, Malik Shukayev This paper studies the cost of limited commitment when a central bank has the discretion to adjust policy whenever the costs of honoring its past commitments become high. Specifically, we consider a central bank that seeks to implement optimal policy in a New Keynesian model by committing to a price-level target path. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E3, E31, E5, E52 Research Theme(s): Models and tools, Economic models, Monetary policy, Monetary policy framework and transmission
The Role of Corporate Saving over the Business Cycle: Shock Absorber or Amplifier? Staff working paper 2018-59 Xiaodan Gao, Shaofeng Xu We document countercyclical corporate saving behavior with the degree of countercyclicality varying nonmonotonically with firm size. We then develop a dynamic stochastic general equilibrium model with heterogeneous firms to explain the pattern and study its implications for business cycles. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E2, E20, E22, E3, E32, G, G3, G31, G32 Research Theme(s): Financial system, Financial institutions and intermediation, Household and business credit, Models and tools, Economic models, Monetary policy, Real economy and forecasting
An Alternative Estimate of Canadian Potential Output: The Multivariate State-Space Framework Staff discussion paper 2018-14 Lise Pichette, Maria Bernier, Marie-Noëlle Robitaille In this paper, we extend the state-space methodology proposed by Blagrave et al. (2015) and decompose Canadian potential output into trend labour productivity and trend labour input. As in Blagrave et al. (2015), we include output growth and inflation expectations from consensus forecasts to help refine our estimates. Content Type(s): Staff research, Staff discussion papers JEL Code(s): C, C5, E, E0, E5 Research Theme(s): Models and tools, Economic models, Monetary policy, Real economy and forecasting
Modelling the Macrofinancial Effects of a House Price Correction in Canada Staff analytical note 2018-36 Thibaut Duprey, Xuezhi Liu, Cameron MacDonald, Maarten van Oordt, Sofia Priazhkina, Xiangjin Shen, Joshua Slive We use a suite of risk-assessment models to examine the possible impact of a hypothetical house price correction, centred in the Toronto and Vancouver areas. We also assume financial stress significantly amplifies the macroeconomic impact of the house price decline. Content Type(s): Staff research, Staff analytical notes JEL Code(s): E, E2, E27, E3, E37, E4, E44, G, G2, G21 Research Theme(s): Financial system, Financial institutions and intermediation, Financial stability and systemic risk, Household and business credit, Models and tools, Economic models
The Framework for Risk Identification and Assessment Technical report No. 113 Cameron MacDonald, Virginie Traclet Risk assessment models are an important component of the Bank’s analytical tool kit for assessing the resilience of the financial system. We describe the Framework for Risk Identification and Assessment (FRIDA), a suite of models developed at the Bank of Canada to quantify the impact of financial stability risks to the broader economy and a range of financial system participants (households, businesses and banks). Content Type(s): Staff research, Technical reports JEL Code(s): C, C3, C5, C6, C7, D, D1, E, E0, E00, E2, E27, E3, E37, E4, E47, G, G0, G2, G21 Research Theme(s): Financial system, Financial institutions and intermediation, Financial stability and systemic risk, Models and tools, Economic models