Staff working papers

• Regime-Switching Models: A Guide to the Bank of Canada Gauss Procedures

  Staff Working Paper 1996-3 Simon van Norden, Robert Vigfusson

  This paper is a user's guide to a set of Gauss procedures developed at the Bank of Canada for estimating regime-switching models.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods JEL Code(s): C, C6, C63

• Decomposing U.S. Nominal Interest Rates into Expected Inflation and Ex Ante Real Interest Rates Using Structural VAR Methodology

  Staff Working Paper 1996-2 Pierre St-Amant

  In this paper, the author uses structural vector autoregression methodology to decompose U.S. nominal interest rates into an expected inflation component and an ex ante real interest rate component. He identifies inflation expectations and ex ante real interest rate shocks by assuming that nominal interest rates and inflation expectations move one-for-one in the long-run—they are cointegrated (1,1)—and that the real interest rate is stationary.

  Content Type(s): Staff research, Staff working papers Topic(s): Interest rates, International topics JEL Code(s): E, E3, E31, E4, E43

• Switching Between Chartists and Fundamentalists: A Markov Regime-Switching Approach

  Staff Working Paper 1996-1 Robert Vigfusson

  Since the early 1980s, models based on economic fundamentals have been poor at explaining the movements in the exchange rate (Messe 1990). In response to this problem, Frankel and Froot (1988) developed a model that uses two approaches to forecast the exchange rate: the fundamentalist approach, which bases the forecast on economic fundamentals, and the chartist approach, which bases the forecast on the past behaviour of the exchange rate.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial markets JEL Code(s): C, C4, C40, G, G1, G12