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117 Results

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 Topic(s): Economic models, Financial institutions, Financial stability, Housing JEL Code(s): C, C3, C5, C6, C7, D, D1, E, E0, E00, E2, E27, E3, E37, E4, E47, G, G0, G2, G21

Assessing Vulnerabilities in Emerging-Market Economies

Staff Discussion Paper 2018-13 Tatjana Dahlhaus, Alexander Lam
This paper introduces a new tool to monitor economic and financial vulnerabilities in emerging-market economies. We obtain vulnerability indexes for several early warning indicators covering 26 emerging markets from 1990 to 2017 and use them to monitor the evolution of vulnerabilities before, during and after an economic or financial crisis.

Characterizing the Canadian Financial Cycle with Frequency Filtering Approaches

Staff Analytical Note 2018-34 Andrew Lee-Poy
In this note, I use two multivariate frequency filtering approaches to characterize the Canadian financial cycle by capturing fluctuations in the underlying variables with respect to a long-term trend. The first approach is a dynamically weighted composite, and the second is a stochastic cycle model.

Ambiguity, Nominal Bond Yields and Real Bond Yields

Staff Working Paper 2018-24 Guihai Zhao
Equilibrium bond-pricing models rely on inflation being bad news for future growth to generate upward-sloping nominal yield curves. We develop a model that can generate upward-sloping nominal and real yield curves by instead using ambiguity about inflation and growth.
Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Financial markets, Interest rates JEL Code(s): E, E4, E43, G, G0, G00, G1, G12

Measuring Vulnerabilities in the Non-Financial Corporate Sector Using Industry- and Firm-Level Data

Staff Analytical Note 2018-17 Timothy Grieder, Michal Lipsitz
Aggregate non-financial corporate debt-to-GDP has been growing rapidly in recent years and is at an all-time high. This growth began in 2011 and accelerated as the oil price shock affected the Canadian economy.

How to Manage Macroeconomic and Financial Stability Risks: A New Framework

Staff Analytical Note 2018-11 Alexander Ueberfeldt, Thibaut Duprey
Financial system vulnerabilities increase the downside risk to future GDP growth. Macroprudential tightening significantly reduces financial stability risks associated with vulnerabilities. Monetary policy faces a trade-off between financial stability and macroeconomic risks.

Asymmetric Risks to the Economic Outlook Arising from Financial System Vulnerabilities

Staff Analytical Note 2018-6 Thibaut Duprey
When financial system vulnerabilities are elevated, they can give rise to asymmetric risks to the economic outlook. To illustrate this, I consider the economic outlook presented in the Bank of Canada’s October 2017 Monetary Policy Report in the context of two key financial system vulnerabilities: high levels of household indebtedness and housing market imbalances.

Adverse Selection with Heterogeneously Informed Agents

Staff Working Paper 2018-7 Mohammad Davoodalhosseini
A model of over-the-counter markets is proposed. Some asset buyers are informed in that they can identify high quality assets. Heterogeneous sellers with private information choose what type of buyers they want to trade with.

Who Pays? CCP Resource Provision in the Post-Pittsburgh World

Staff Discussion Paper 2017-17 Jorge Cruz Lopez, Mark Manning
At the Pittsburgh Summit in 2009, G20 countries announced their commitment to clear all standardized over-the-counter (OTC) derivatives through central counterparties (CCPs). Since then, CCPs have become increasingly important and there has been an extensive program of regulatory enhancements to both them and OTC derivatives markets.
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