The Share of Systematic Variations in the Canadian Dollar—Part II Staff Analytical Note 2017-1 Jean-Sébastien Fontaine, Guillaume Nolin This analytical note examines how much of the systematic variation in the Canadian dollar is attributable to its sensitivity to commodity prices. We introduce a new “oil” portfolio that captures systematic variations when the exchange rates of commodity exporters and commodity importers move in opposite directions. Content Type(s): Staff research, Staff analytical notes Research Topic(s): Exchange rates JEL Code(s): F, F3, F31
Terms-of-Trade and House Price Fluctuations: A Cross-Country Study Staff Working Paper 2017-1 Paul Corrigan Terms-of-trade shocks are known to be key drivers of business cycles in open economies. This paper argues that terms-of-trade shocks were also important for house price fluctuations in a panel of developed countries over the 1994–2015 period. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial stability, Housing, International topics JEL Code(s): C, C3, C32, E, E3, E32, E5, E51, F, F3, F36, F4, F41
The Share of Systematic Variations in the Canadian Dollar—Part I Staff Analytical Note 2016-15 Jean-Sébastien Fontaine, Guillaume Nolin In this analytical note we show that the share of the systematic variations in the Canadian dollar has risen significantly in the past two decades. Systematic variations in the exchange rate are shared with other currencies. This parallels the equity market, where variations in the price of a given stock are shared with variations in the prices of other stocks. Content Type(s): Staff research, Staff analytical notes Research Topic(s): Exchange rates JEL Code(s): F, F3, F31
On What States Do Prices Depend? Answers from Ecuador Staff Working Paper 2016-43 Craig Benedict, Mario J. Crucini, Anthony Landry In this paper, we argue that differences in the cost structures across sectors play an important role in firms’ decisions to adjust their prices. We develop a menu-cost model of pricing in which retail firms intermediate trade between producers and consumers. Content Type(s): Staff research, Staff working papers Research Topic(s): Inflation and prices, Monetary policy transmission JEL Code(s): E, E3, E5, F, F3, F33
On the Value of Virtual Currencies Staff Working Paper 2016-42 Wilko Bolt, Maarten van Oordt This paper develops an economic framework to analyze the exchange rate of virtual currency. Three components are important: first, the current use of virtual currency to make payments; second, the decision of forward-looking investors to buy virtual currency (thereby effectively regulating its supply); and third, the elements that jointly drive future consumer adoption and merchant acceptance of virtual currency. Content Type(s): Staff research, Staff working papers Research Topic(s): Asset pricing, Digital currencies and fintech, Exchange rates JEL Code(s): E, E4, E42, E5, E51, F, F3, F31, G, G1
International Banking and Cross-Border Effects of Regulation: Lessons from Canada Staff Working Paper 2016-34 H. Evren Damar, Adi Mordel We study how changes in prudential requirements affect cross-border lending of Canadian banks by utilizing an index that aggregates adjustments in key regulatory instruments across jurisdictions. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial institutions, Financial stability, Financial system regulation and policies JEL Code(s): F, F3, F34, G, G0, G01, G2, G21
Global Macro Risks in Currency Excess Returns Staff Working Paper 2016-32 Kimberly Berg, Nelson C. Mark We study a cross section of carry-trade-generated currency excess returns in terms of their exposure to global fundamental macroeconomic risk. Content Type(s): Staff research, Staff working papers Research Topic(s): Asset pricing, Exchange rates, Interest rates JEL Code(s): E, E2, E21, E4, E43, F, F3, F31, G, G1, G12
What to Expect When China Liberalizes Its Capital Account Staff Discussion Paper 2016-10 Mark Kruger, Gurnain Pasricha When China joined the World Trade Organization in December 2001, it marked a watershed for the world economy. Ten years from now, the opening of China’s capital account and the financial integration that will unfold will be viewed as a milestone of similar importance. Content Type(s): Staff research, Staff discussion papers Research Topic(s): Balance of payments and components, Exchange rate regimes, International topics JEL Code(s): F, F3, F31, F32, G, G1, G18
Government Corruption and Foreign Direct Investment Under the Threat of Expropriation Staff Working Paper 2016-13 Christopher Hajzler, Jonathan Rosborough Foreign investment is often constrained by two forms of political risk: expropriation and corruption. We examine the role of government corruption in foreign direct investment (FDI) when contracts are not fully transparent and investors face the threat of expropriation. Content Type(s): Staff research, Staff working papers Research Topic(s): Development economics, Economic models, International topics JEL Code(s): F, F2, F21, F23, F3, F34
The Dynamics of Capital Flow Episodes Staff Working Paper 2016-9 Christian Friedrich, Pierre Guérin This paper proposes a novel methodology for identifying episodes of strong capital flows based on a regime-switching model. In comparison with the existing literature, a key advantage of our methodology is to estimate capital flow regimes without the need for context- and sample-specific assumptions. Content Type(s): Staff research, Staff working papers Research Topic(s): Econometric and statistical methods, International financial markets, International topics, Monetary policy and uncertainty JEL Code(s): F, F2, F21, F3, F32, G, G1, G11