What Fed Funds Futures Tell Us About Monetary Policy Uncertainty Staff Working Paper 2016-61 Jean-Sébastien Fontaine The uncertainty around future changes to the Federal Reserve target rate varies over time. In our results, the main driver of uncertainty is a “path” factor signaling information about future policy actions, which is filtered from federal funds futures data. Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Financial markets, Interest rates JEL Code(s): E, E4, E43, E44, E47, G, G1, G12, G13
Examining Full Collateral Coverage in Canada’s Large Value Transfer System Staff Working Paper 2015-29 Lana Embree, Varya Taylor The Large Value Transfer System (LVTS) is Canada’s main electronic interbank funds transfer system that financial institutions use daily to transmit thousands of payments worth several billions of dollars. Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Payment clearing and settlement systems JEL Code(s): E, E4, E47, G, G2, G21
Predicting Financial Stress Events: A Signal Extraction Approach Staff Working Paper 2014-37 Ian Christensen, Fuchun Li The objective of this paper is to propose an early warning system that can predict the likelihood of the occurrence of financial stress events within a given period of time. To achieve this goal, the signal extraction approach proposed by Kaminsky, Lizondo and Reinhart (1998) is used to monitor the evolution of a number of economic indicators that tend to exhibit an unusual behaviour in the periods preceding a financial stress event. Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Financial stability JEL Code(s): C, C1, C14, C4, E, E3, E37, E4, E47, F, F3, F36, F37, G, G0, G01, G1, G17
Forecasting Short-Term Real GDP Growth in the Euro Area and Japan Using Unrestricted MIDAS Regressions Staff Discussion Paper 2014-3 Maxime Leboeuf, Louis Morel In this paper, the authors develop a new tool to improve the short-term forecasting of real GDP growth in the euro area and Japan. This new tool, which uses unrestricted mixed-data sampling (U-MIDAS) regressions, allows an evaluation of the usefulness of a wide range of indicators in predicting short-term real GDP growth. Content Type(s): Staff research, Staff discussion papers Topic(s): Econometric and statistical methods, International topics JEL Code(s): C, C5, C50, C53, E, E3, E37, E4, E47
Bond Risk Premia and Gaussian Term Structure Models Staff Working Paper 2014-13 Bruno Feunou, Jean-Sébastien Fontaine Cochrane and Piazzesi (2005) show that (i) lagged forward rates improve the predictability of annual bond returns, adding to current forward rates, and that (ii) a Markovian model for monthly forward rates cannot generate the pattern of predictability in annual returns. Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Interest rates JEL Code(s): E, E4, E43, E47, G, G1, G12
Cash Management and Payment Choices: A Simulation Model with International Comparisons Staff Working Paper 2013-53 Carlos Arango, Yassine Bouhdaoui, David Bounie, Martina Eschelbach, Lola Hernández Despite various payment innovations, today, cash is still heavily used to pay for low-value purchases. This paper develops a simulation model to test whether standard implications of the theory on cash management and payment choices can explain the use of payment instruments by transaction size. Content Type(s): Staff research, Staff working papers Topic(s): Bank notes, Financial services, International topics JEL Code(s): C, C6, C61, E, E4, E41, E47
Estimating the Policy Rule from Money Market Rates when Target Rate Changes Are Lumpy Staff Working Paper 2012-41 Jean-Sébastien Fontaine Most central banks effect changes to their target or policy rate in discrete increments (e.g., multiples of 0.25%) following public announcements on scheduled dates. Still, for most applications, researchers rely on the assumption that the policy rate changes linearly with economic conditions and they do not distinguish between dates with and without scheduled announcements. Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Financial markets, Interest rates JEL Code(s): E, E4, E43, E44, E47, G, G1, G12, G13
Forecasting Inflation and the Inflation Risk Premiums Using Nominal Yields Staff Working Paper 2012-37 Bruno Feunou, Jean-Sébastien Fontaine We provide a decomposition of nominal yields into real yields, expectations of future inflation and inflation risk premiums when real bonds or inflation swaps are unavailable or unreliable due to their relative illiquidity. Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Econometric and statistical methods, Inflation and prices, Interest rates JEL Code(s): E, E4, E43, E47, G, G1, G12
Short-Term Forecasting of the Japanese Economy Using Factor Models Staff Working Paper 2012-7 Claudia Godbout, Marco J. Lombardi While the usefulness of factor models has been acknowledged over recent years, little attention has been devoted to the forecasting power of these models for the Japanese economy. In this paper, we aim at assessing the relative performance of factor models over different samples, including the recent financial crisis. Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, International topics JEL Code(s): C, C5, C50, C53, E, E3, E37, E4, E47
Mixed Frequency Forecasts for Chinese GDP Staff Working Paper 2011-11 Philipp Maier We evaluate different approaches for using monthly indicators to predict Chinese GDP for the current and the next quarter (‘nowcasts’ and ‘forecasts’, respectively). We use three types of mixed-frequency models, one based on an economic activity indicator (Liu et al., 2007), one based on averaging over indicator models (Stock and Watson, 2004), and a static factor model (Stock and Watson, 2002). Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, International topics JEL Code(s): C, C5, C50, C53, E, E3, E37, E4, E47