Evaluating the Effect of the Bank of Canada's Conditional Commitment Policy Staff Discussion Paper 2010-11 Zhongfang He The author evaluates the effect of the Bank of Canada's conditional commitment regarding the target overnight rate on longer-term market interest rates by taking into account the relationship between interest rates, inflation, and unemployment rates. Content Type(s): Staff research, Staff discussion papers Research Topic(s): Interest rates, Monetary policy implementation, Monetary policy transmission JEL Code(s): E, E4, E5, E6
Liquidity Transformation and Bank Capital Requirements Staff Working Paper 2010-22 Hajime Tomura This paper presents a dynamic general equilibrium model where asymmetric information about asset quality leads to asset illiquidity. Banking arises endogenously in this environment as banks can pool illiquid assets to average out their idiosyncratic qualities and issue liquid liabilities backed by pooled assets whose total quality is public information. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial stability, Financial system regulation and policies JEL Code(s): D, D8, D82, E, E4, E44, G, G2, G21
Inventories in ToTEM Staff Discussion Paper 2010-9 Oleksiy Kryvtsov, Yang Zhang ToTEM – the Bank of Canada’s principal projection and policy-analysis model for the Canadian economy – is extended to include inventories. In the model, firms accumulate inventories of finished goods for their role in facilitating the demand for goods. Content Type(s): Staff research, Staff discussion papers Research Topic(s): Business fluctuations and cycles, Economic models JEL Code(s): E, E3, E31, E32
Inventories, Stockouts, and ToTEM Staff Discussion Paper 2010-8 Oleksiy Kryvtsov, Yang Zhang Inventory investment is an important component of the Canadian business cycle. Despite its small average size – less than 1 per cent of output – it exhibits volatile procyclical fluctuations, accounting for almost one-third of output variance. Content Type(s): Staff research, Staff discussion papers Research Topic(s): Business fluctuations and cycles, Monetary policy transmission JEL Code(s): E, E3, E31, E32
An Assessment of the Bank of Canada's Term PRA Facility Staff Working Paper 2010-20 Emanuella Enenajor, Alex Sebastian, Jonathan Witmer This paper empirically assesses the effectiveness of the Bank of Canada's term Purchase and Resale Agreement (PRA) facility in reducing short-term bank funding pressures, as measured by the CDOR-OIS spread. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial markets, Financial stability JEL Code(s): E, E5, E58, G, G1, G12, G18
A Model of Housing Stock for Canada Staff Working Paper 2010-19 David Dupuis, Yi Zheng Using an error-correction model (ECM) framework, the authors attempt to quantify the degree of disequilibrium in Canadian housing stock over the period 1961–2008 for the national aggregate and over 1981–2008 for the provinces. Content Type(s): Staff research, Staff working papers Research Topic(s): Domestic demand and components JEL Code(s): E, E2, E21, J, J0, J00
The Transmission of Shocks to the Chinese Economy in a Global Context: A Model-Based Approach Staff Working Paper 2010-17 Jeannine Bailliu, Patrick Blagrave To better understand the dynamics of the Chinese economy and its interaction with the global economy, the authors incorporate China into an existing model for the G-3 economies (i.e., the United States, the euro area, and Japan), paying particular attention to modelling the exchange rate and monetary policy in China. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Economic models, Exchange rate regimes, International topics JEL Code(s): E, E3, E32, E5, E52, F, F4, F41
Inflation and Unemployment in Competitive Search Equilibrium Staff Working Paper 2010-15 Mei Dong Using a monetary search model, Rocheteau, Rupert and Wright (2007) show that the relationship between inflation and unemployment can be positive or negative depending on the primitives of the model. The key features are indivisible labor, nonseparable preferences and bargaining. Content Type(s): Staff research, Staff working papers Research Topic(s): Inflation: costs and benefits JEL Code(s): E, E1, E12, E13, E4, E40, E5, E52
Financial Stress, Monetary Policy, and Economic Activity Staff Working Paper 2010-12 Fuchun Li, Pierre St-Amant This paper examines empirically the impact of financial stress on the transmission of monetary policy shocks in Canada. The model used is a threshold vector autoregression in which a regime change occurs if financial stress conditions cross a critical threshold. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial stability, Monetary policy and uncertainty JEL Code(s): C, C0, C01, E, E5, E50, G, G0, G01
The Fisher BCPI: The Bank of Canada’s New Commodity Price Index Staff Discussion Paper 2010-6 Ilan Kolet, Ryan Macdonald The prices of commodities produced in Canada have important implications for the performance of the Canadian economy and the conduct of monetary policy. The authors explain an important change to the methodology used to construct the Bank of Canada commodity price index (BCPI). Content Type(s): Staff research, Staff discussion papers Research Topic(s): Econometric and statistical methods, Inflation and prices JEL Code(s): C, C1, E, E3