How Important Is Liquidity Risk for Sovereign Bond Risk Premia? Evidence from the London Stock Exchange Staff Working Paper 2008-47 Ron Alquist This paper uses the framework of arbitrage-pricing theory to study the relationship between liquidity risk and sovereign bond risk premia. The London Stock Exchange in the late 19th century is an ideal laboratory in which to test the proposition that liquidity risk affects the price of sovereign debt. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial markets, International topics JEL Code(s): F, F2, F21, F3, F34, F36, G, G1, G12, G15
The Role of Foreign Exchange Dealers in Providing Overnight Liquidity Staff Working Paper 2008-44 Chris D'Souza This paper illustrates that dealers in foreign exchange markets not only provide intraday liquidity, they are key participants in the provision of overnight liquidity. Dealing institutions receive compensation for holding undesired inventory balances in part from the information they receive in customer trades. Content Type(s): Staff research, Staff working papers Research Topic(s): Exchange rates, Financial markets, Market structure and pricing JEL Code(s): D, D8, D82, F, F3, F31, G, G2, G21
McCallum Rules, Exchange Rates, and the Term Structure of Interest Rates Staff Working Paper 2008-43 Antonio Diez de los Rios McCallum (1994a) proposes a monetary rule where policymakers have some tendency to resist rapid changes in exchange rates to explain the forward premium puzzle. Content Type(s): Staff research, Staff working papers Research Topic(s): Exchange rates, Interest rates, Monetary policy transmission JEL Code(s): E, E4, E43, F, F3, F31, G, G1, G12, G15
The Canadian Dollar and Commodity Prices: Has the Relationship Changed over Time? Staff Discussion Paper 2008-15 Philipp Maier, Brian DePratto The authors examine the impact of the recent run-up in energy and non-energy commodity prices on the Canadian dollar. Using the Bank of Canada's exchange rate equation, they find that the differences between the actual value of the Canadian exchange rate and the simulated values observed in 2007 are not historically large. Still, given that […] Content Type(s): Staff research, Staff discussion papers Research Topic(s): Exchange rates JEL Code(s): F, F3, F31
Import Price Dynamics in Major Advanced Economies and Heterogeneity in Exchange Rate Pass-Through Staff Working Paper 2008-39 Stephane Dees, Matthias Burgert, Nicolas Parent This paper aims at showing heterogeneity in the degree of exchange rate pass-through to import prices in major advanced economies at three different levels: 1) across destination markets; 2) across types of exporters (distinguishing developed economy from emerging economy exporters); and 3) over time. Content Type(s): Staff research, Staff working papers Research Topic(s): Exchange rates, Inflation and prices JEL Code(s): E, E3, E31, F, F3, F4, F41
The Impact of Sovereign Wealth Funds on International Financial Stability Staff Discussion Paper 2008-14 Tamara Gomes Over the recent period, many emerging-market economies and commodity-exporting nations have experienced unprecedented growth and accumulated substantial amounts of foreign exchange reserves. The management of these foreign reserves has led to the emergence of important financial actors: sovereign wealth funds (SWFs). Content Type(s): Staff research, Staff discussion papers Research Topic(s): Financial stability, Recent economic and financial developments JEL Code(s): F, F2, F21, F3, F31, F32, G, G1, G15
Good Policies or Good Fortune: What Drives the Compression in Emerging Market Spreads? Staff Working Paper 2008-25 Philipp Maier, Garima Vasishtha Since 2002, spreads on emerging market sovereign debt have fallen to historical lows. Given the close links between sovereign spreads, capital flows to emerging markets, and economic growth, understanding the factors driving these spreads is very important. We address this issue in two stages. Content Type(s): Staff research, Staff working papers Research Topic(s): Development economics, Financial stability, International topics JEL Code(s): E, E4, E43, F, F3, F34, G, G1, G12, G15
Do Central Banks Respond to Exchange Rate Movements? Some New Evidence from Structural Estimation Staff Working Paper 2008-24 Wei Dong This paper investigates the impact of exchange rate movements on the conduct of monetary policy in Australia, Canada, New Zealand and the United Kingdom. We develop and estimate a structural general equilibrium two-sector model with sticky prices and wages and limited exchange rate pass-through. Content Type(s): Staff research, Staff working papers Research Topic(s): Exchange rates, International topics, Monetary policy framework JEL Code(s): F, F3, F4
Policy Coordination in an International Payment System Staff Working Paper 2008-17 James Chapman Given the increasing interdependence of both financial systems and attendant payment and settlement systems a vital question is what form should optimal policy take when there are two connected payment systems with separate regulators. Content Type(s): Staff research, Staff working papers Research Topic(s): Exchange rate regimes, Payment clearing and settlement systems JEL Code(s): E, E4, E42, E5, E58, F, F3, F31, F33
Reforming the IMF: Lessons from Modern Central Banking Staff Discussion Paper 2008-6 Philipp Maier, Eric Santor The authors examine the institutional and governance framework of modern central banks to determine whether there are lessons that can be applied to the International Monetary Fund's (IMF's) institutional framework. Such a comparison is appealing for two reasons. First, both central banks and the IMF carry out tasks that can be described as "delegated responsibilities." […] Content Type(s): Staff research, Staff discussion papers Research Topic(s): International topics JEL Code(s): F, F3