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418 Results

Estimating the Demand for Settlement Balances in the Canadian Large Value Transfer System

Staff Working Paper 2012-15 Nellie Zhang
This paper applies a static model of an interest rate corridor to the Canadian data, and estimates the aggregate demand for central-bank settlement balances in the Large Value Transfer System (LVTS).
May 17, 2012

Inflation Targeting: The Recent International Experience

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 […]

Central Bank Communication or the Media’s Interpretation: What Moves Markets?

Staff Working Paper 2012-9 Scott Hendry
The goal of this paper is to investigate what type of information from Bank of Canada communication statements or the market commentary based on these statements has a significant effect on the volatility or level of returns in a short-term interest rate market.
Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Financial markets JEL Code(s): E, E5, E58, G, G1, G14

A Framework to Assess Vulnerabilities Arising from Household Indebtedness Using Microdata

Staff Discussion Paper 2012-3 Ramdane Djoudad
Rising levels of household indebtedness have created concerns about the vulnerabilities of households to adverse economic shocks and the impact on financial stability. To assess these risks, the author presents a formal stress-testing framework that uses microdata to simulate how various economic shocks affect the distribution of the debt-service ratio (DSR) for the household sector.

Macroprudential Rules and Monetary Policy when Financial Frictions Matter

Staff Working Paper 2012-6 Jeannine Bailliu, Césaire Meh, Yahong Zhang
This paper examines the interaction between monetary policy and macroprudential policy and whether policy makers should respond to financial imbalances. To address this issue, we build a dynamic general equilibrium model that features financial market frictions and financial shocks as well as standard macroeconomic shocks.
February 23, 2012

What Explains Trends in Household Debt in Canada?

Similar to the experiences in many other countries, household indebtedness in Canada has exhibited an upward trend over the past 30 years. Both mortgage and non-mortgage (consumer) credit have contributed to this development. In this article, the authors use microdata to highlight the main factors underlying the strong trend increase since the late 1990s. Favourable housing affordability, owing to factors such as income growth and low interest rates, has supported significant increases in home-ownership rates and mortgage debt. Much of the rise in consumer credit has been facilitated by higher housing values (used as collateral for loans) and financial innovation that makes it easier for households to access this credit.
Content Type(s): Publications, Bank of Canada Review articles Topic(s): Credit and credit aggregates JEL Code(s): D, D1, D12, D14, E, E5, E51
February 23, 2012

Household Borrowing and Spending in Canada

Understanding how much of the increased debt load of Canadian households has been used to finance household spending on consumption and home renovation is important for the conduct of monetary policy. In this article, the authors use a comprehensive data set that provides information on the uses of debt by Canadian households. They first present some facts regarding the evolution of Canadian household debt over the period from 1999 to 2010, emphasizing the increased importance of debt flows that are secured by housing. They then explore how Canadian households have used their borrowed funds over the same period, and assess the role of these borrowed funds in financing total consumption and spending on home renovation. Finally, they examine the possible effects of a decline in house prices on consumption when housing equity is used as collateral against household indebtedness.

Bank Leverage Regulation and Macroeconomic Dynamics

Staff Working Paper 2011-32 Ian Christensen, Césaire Meh, Kevin Moran
This paper assesses the merits of countercyclical bank balance sheet regulation for the stabilization of financial and economic cycles and examines its interaction with monetary policy.

Price-Level Targeting and Inflation Expectations: Experimental Evidence

Staff Working Paper 2011-18 Robert Amano, Jim Engle-Warnick, Malik Shukayev
In this paper, we use an economics decision-making experiment to test a key assumption underpinning the efficacy of price-level targeting relative to inflation targeting for business cycle stabilization and mitigating the effects of the zero lower bound on nominal interest rates.
Content Type(s): Staff research, Staff working papers Topic(s): Monetary policy framework JEL Code(s): E, E3, E32, E5, E52
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