Staff research

• Price-Level versus Inflation Targeting with Financial Market Imperfections

  Staff Working Paper 2008-26 Francisco Covas, Yahong Zhang

  This paper compares price-level-path targeting (PT) with inflation targeting (IT) in a sticky-price, dynamic, general equilibrium model augmented with imperfections in both the debt and equity markets.

  Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Inflation targets, Monetary policy framework JEL Code(s): E, E4, E40, E5, E50

• Good Policies or Good Fortune: What Drives the Compression in Emerging Market Spreads?

  Staff Working Paper 2008-25 Philipp Maier, Garima Vasishtha

  Since 2002, spreads on emerging market sovereign debt have fallen to historical lows. Given the close links between sovereign spreads, capital flows to emerging markets, and economic growth, understanding the factors driving these spreads is very important. We address this issue in two stages.

  Content Type(s): Staff research, Staff working papers Topic(s): Development economics, Financial stability, International topics JEL Code(s): E, E4, E43, F, F3, F34, G, G1, G12, G15

• Do Central Banks Respond to Exchange Rate Movements? Some New Evidence from Structural Estimation

  Staff Working Paper 2008-24 Wei Dong

  This paper investigates the impact of exchange rate movements on the conduct of monetary policy in Australia, Canada, New Zealand and the United Kingdom. We develop and estimate a structural general equilibrium two-sector model with sticky prices and wages and limited exchange rate pass-through.

  Content Type(s): Staff research, Staff working papers Topic(s): Exchange rates, International topics, Monetary policy framework JEL Code(s): F, F3, F4

• Liquidity Efficiency and Distribution in the LVTS: Non-Neutrality of System Changes under Network Asymmetry

  Staff Discussion Paper 2008-11 Sean O'Connor, James Chapman, Kirby Millar

  The authors consider the liquidity efficiency of Tranche 2 of the Large Value Transfer System (LVTS T2) by examining, through an empirical analysis, some plausible strategic reactions of individual participants to a systemwide shock to available liquidity in the system.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Financial institutions, Financial services, Payment clearing and settlement systems JEL Code(s): G, G2, G21, L, L1, L13, L14

• A Structural VAR Approach to Core Inflation in Canada

  Staff Discussion Paper 2008-10 Sylvain Martel

  The author constructs a measure of core inflation using a structural vector autoregression containing oil-price growth, output growth, and inflation. This "macro-founded" measure of inflation forecasts total inflation at least as well as other, atheoretical measures.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Inflation and prices JEL Code(s): C, C5, C53, E, E3, E31

• The Implementation of Monetary Policy in Canada

  Staff Discussion Paper 2008-9 Walter Engert, Toni Gravelle, Donna Howard

  The authors present a detailed discussion of the Bank of Canada's framework for the implementation of monetary policy. As background, they provide a brief overview of the financial system in Canada, including a discussion of the financial services industry and the money market.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Financial institutions, Financial markets, Monetary policy implementation, Payment clearing and settlement systems JEL Code(s): E, E5, E52, E58, G, G2, G21

• On the Amplification Role of Collateral Constraints

  Staff Working Paper 2008-23 Caterina Mendicino

  Following the seminal contribution of Kiyotaki and Moore (1997), the role of collateral constraints for business cycle fluctuations has been highlighted by several authors and collateralized debt is becoming a popular feature of business cycle models.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Credit and credit aggregates JEL Code(s): E, E2, E20, E3, E32

• Information Shocks, Jumps, and Price Discovery - Evidence from the U.S. Treasury Market

  Staff Working Paper 2008-22 George Jiang, Ingrid Lo, Adrien Verdelhan

  We examine large price changes, known as jumps, in the U.S. Treasury market. Using recently developed statistical tools, we identify price jumps in the 2-, 3-, 5-, 10-year notes and 30-year bond during the period of 2005-2006.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial markets JEL Code(s): G, G1, G12, G14

• The Cost of Equity in Canada: An International Comparison

  Staff Working Paper 2008-21 Jonathan Witmer

  This paper calculates an implied cost of equity for 19 developed countries from 1991 to 2006. During this period, there has been a decline in the cost of equity of about 10-15 bps per year, which can be partially attributed to declining government yields and declining inflation.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial markets, International topics JEL Code(s): G, G3, G30, G38

• The Effect of the Sarbanes-Oxley Act on CEO Pay for Luck

  Staff Working Paper 2008-20 Teodora Paligorova

  According to the rent-extraction hypothesis, weak corporate governance allows entrenched CEOs to capture the pay-setting process and benefit from events outside of their control – get paid for luck.

  Content Type(s): Staff research, Staff working papers Topic(s): Labour markets JEL Code(s): G, G3, G38, J, J3, J33, M, M5, M52