Search-for-Yield in Canadian Fixed-Income Mutual Funds and Monetary Policy Staff Working Paper 2014-3 Sermin Gungor, Jesus Sierra This paper investigates the effects of monetary policy on the risk-taking behavior of fixed-income mutual funds in Canada. We consider different measures of the stance of monetary policy and investigate active variation in mutual funds’ risk exposure in response to monetary policy. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial institutions, Monetary policy transmission JEL Code(s): E, E5, E52, G, G2, G23
Household Risk Management and Actual Mortgage Choice in the Euro Area Staff Working Paper 2014-1 Michael Ehrmann, Michael Ziegelmeyer Mortgages constitute the largest part of household debt. An essential choice when taking out a mortgage is between fixed-interest-rate mortgages (FRMs) and adjustable-interest-rate mortgages (ARMs). However, so far, no comprehensive cross‐country study has analyzed what determines household demand for mortgage types, a task that this paper takes up using new data for the euro area. Content Type(s): Staff research, Staff working papers Research Topic(s): Credit and credit aggregates, Monetary policy transmission JEL Code(s): D, D1, D12, E, E4, E43, E5, E52, G, G2, G21
Expectations and Monetary Policy: Experimental Evidence Staff Working Paper 2013-44 Oleksiy Kryvtsov, Luba Petersen The effectiveness of monetary policy depends, to a large extent, on market expectations of its future actions. In a standard New Keynesian business-cycle model with rational expectations, systematic monetary policy reduces the variance of inflation and the output gap by at least two-thirds. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Monetary policy implementation, Monetary policy transmission JEL Code(s): C, C9, D, D8, D84, E, E3, E5, E52
Central Bank Communications Before, During and After the Crisis: From Open-Market Operations to Open-Mouth Policy Staff Working Paper 2013-41 Ianthi Vayid The days when secrecy and opacity were the bywords of central banking are gone. The advent of inflation targeting in the early 1990s acted as the catalyst for enhanced transparency and communications in the conduct of monetary policy. Content Type(s): Staff research, Staff working papers Research Topic(s): Central bank research, Credibility, Financial stability, Inflation targets, Monetary policy framework, Monetary policy implementation JEL Code(s): E, E5, E52, E58
ToTEM II: An Updated Version of the Bank of Canada’s Quarterly Projection Model Technical Report No. 100 José Dorich, Michael K. Johnston, Rhys R. Mendes, Stephen Murchison, Yang Zhang This report provides a detailed technical description of an updated version of the Terms-of-Trade Economic Model (ToTEM II), which replaced ToTEM (Murchison and Rennison 2006) in June 2011 as the Bank of Canada’s quarterly projection model for Canada. Content Type(s): Staff research, Technical reports Research Topic(s): Business fluctuations and cycles, Economic models JEL Code(s): E, E1, E17, E2, E20, E3, E30, E4, E40, E5, E50, F, F4, F41
The Common Component of CPI: An Alternative Measure of Underlying Inflation for Canada Staff Working Paper 2013-35 Mikael Khan, Louis Morel, Patrick Sabourin In this paper, the authors propose a measure of underlying inflation for Canada obtained from estimating a monthly factor model on individual components of the CPI. This measure, labelled the common component of CPI, has intuitive appeal and a number of interesting features. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Econometric and statistical methods, Inflation and prices, Monetary policy framework JEL Code(s): C, C1, E, E3, E31, E32, E5, E52, E58
Money Market Rates and Retail Interest Regulation in China: The Disconnect between Interbank and Retail Credit Conditions Staff Working Paper 2013-20 Nathan Porter, TengTeng Xu Interest rates in China are composed of a mix of both market-determined interest rates (interbank rates and bond yields), and regulated interest rates (retail lending and deposit rates), reflecting China’s gradual process of interest rate liberalization. Content Type(s): Staff research, Staff working papers Research Topic(s): Development economics, Econometric and statistical methods, Financial markets, Monetary policy framework, Monetary policy transmission JEL Code(s): C, C2, C22, E, E4, E43, E5, E52, E58
May 16, 2013 Unconventional Monetary Policies: Evolving Practices, Their Effects and Potential Costs Bank of Canada Review - Spring 2013 Lena Suchanek, Eric Santor Following the recent financial crisis, major central banks have introduced several types of unconventional monetary policy measures, including liquidity and credit facilities, asset purchases and forward guidance. To date, these measures appear to have been successful. They restored market functioning, facilitated the transmission of monetary policy and supported economic activity. They have potential costs, however, including challenges related to the greatly expanded balance sheets of central banks and the eventual exit from these measures, as well as the vulnerabilities that can arise from prolonged monetary accommodation. Content Type(s): Publications, Bank of Canada Review articles Research Topic(s): Central bank research, Financial markets, International topics, Monetary policy framework JEL Code(s): E, E5, E52, E58, E6, E65
Countercyclical Bank Capital Requirement and Optimized Monetary Policy Rules Staff Working Paper 2013-8 Carlos De Resende, Ali Dib, René Lalonde, Nikita Perevalov Using BoC-GEM-Fin, a large-scale DSGE model with real, nominal and financial frictions featuring a banking sector, we explore the macroeconomic implications of various types of countercyclical bank capital regulations. Results suggest that countercyclical capital requirements have a significant stabilizing effect on key macroeconomic variables, but mostly after financial shocks. Content Type(s): Staff research, Staff working papers Research Topic(s): Economic models, Financial institutions, Financial stability, International topics JEL Code(s): E, E3, E32, E4, E44, E5, G, G1, G2
The Cyclicality of Sales, Regular and Effective Prices: Business Cycle and Policy Implications Staff Working Paper 2013-1 Olivier Coibion, Yuriy Gorodnichenko, Gee Hee Hong We study the cyclical properties of sales, regular price changes and average prices paid by consumers (“effective” prices) using data on prices and quantities sold for numerous retailers across many U.S. metropolitan areas. Content Type(s): Staff research, Staff working papers Research Topic(s): Inflation and prices, Monetary policy framework, Monetary policy transmission JEL Code(s): E, E3, E4, E5