Staff research

• Cross-border Mergers and Hollowing-out

  Staff Working Paper 2009-30 Oana Secrieru, Marianne Vigneault

  The purpose of our paper is to examine the profitability and social desirability of both domestic and foreign mergers in a location-quantity competition model, where we allow for the possibility of hollowing-out of the target firm. We refer to hollowing-out as the situation where the target firm is shut down following a merger with a domestic or foreign acquirer.

  Content Type(s): Staff research, Staff working papers Topic(s): Economic models, International topics, Market structure and pricing JEL Code(s): D, D4, D43, G, G3, G34, L, L1, L13, L4, L41

• Exchange Rate Pass-through and Monetary Policy: How Strong is the Link?

  Staff Working Paper 2009-29 Stephen Murchison

  Several authors have presented reduced-form evidence suggesting that the degree of exchange rate pass-through to the consumer price index has declined in Canada since the early 1980s and is currently close to zero.

  Content Type(s): Staff research, Staff working papers Topic(s): Exchange rates, Monetary policy transmission JEL Code(s): E, E5, E52, F, F3, F31, F4, F41

• Bond Liquidity Premia

  Staff Working Paper 2009-28 Jean-Sébastien Fontaine, René Garcia

  Recent asset pricing models of limits to arbitrage emphasize the role of funding conditions faced by financial intermediaries. In the US, the repo market is the key funding market. Then, the premium of on-the-run U.S. Treasury bonds should share a common component with risk premia in other markets.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial markets, Financial stability JEL Code(s): E, E4, E43, H, H1, H12

• Risk Premium Shocks and the Zero Bound on Nominal Interest Rates

  Staff Working Paper 2009-27 Robert Amano, Malik Shukayev

  There appears to be a disconnect between the importance of the zero bound on nominal interest rates in the real-world and predictions from quantitative DSGE models. Recent economic events have reinforced the relevance of the zero bound for monetary policy whereas quantitative models suggest that the zero bound does not constrain (optimal) monetary policy.

  Content Type(s): Staff research, Staff working papers Topic(s): Monetary policy framework JEL Code(s): E, E3, E32, E5, E52

• Consumption, Housing Collateral, and the Canadian Business Cycle

  Staff Working Paper 2009-26 Ian Christensen, Paul Corrigan, Caterina Mendicino, Shin-Ichi Nishiyama

  Using Bayesian methods, we estimate a small open economy model in which consumers face limits to credit determined by the value of their housing stock. The purpose of this paper is to quantify the role of collateralized household debt in the Canadian business cycle.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Credit and credit aggregates, Monetary policy transmission JEL Code(s): E, E2, E21, E3, E32, E4, E44, E5, E52, R, R2, R21

• Credit Constraints and Consumer Spending

  Staff Working Paper 2009-25 Kimberly Beaton

  This paper examines the relationship between aggregate consumer spending and credit availability in the United States. The author finds that consumer spending falls (rises) in response to a reduction (increase) in credit availability.

  Content Type(s): Staff research, Staff working papers Topic(s): Credit and credit aggregates, Domestic demand and components, Recent economic and financial developments JEL Code(s): E, E2, E21, E27, E4, E44, E5, E51, E58

• Resurrecting the Role of Real Money Balance Effects

  Staff Working Paper 2009-24 José Dorich

  I present a structural econometric analysis supporting the hypothesis that money is still relevant for shaping inflation and output dynamics in the United States. In particular, I find that real money balance effects are quantitatively important, although smaller than they used to be in the early postwar period.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Monetary aggregates, Monetary policy transmission JEL Code(s): E, E3, E31, E32, E5, E52

• Short Changed? The Market's Reaction to the Short Sale Ban of 2008

  Staff Working Paper 2009-23 Louis Gagnon, Jonathan Witmer

  Do short sales restrictions have an impact on security prices? We address this question in the context of a natural experiment surrounding the short sale ban of 2008 using a comprehensive sample of Canadian stocks cross-listed in the U.S.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial markets, International topics JEL Code(s): F, F3, F30, G, G0, G01, G1, G18, G2, G20

• Productivity, the Terms of Trade, and the Real Exchange Rate: The Balassa-Samuelson Hypothesis Revisited

  Staff Working Paper 2009-22 Ehsan U. Choudhri, Lawrence L. Schembri

  The paper examines how the Balassa-Samuelson hypothesis is affected by a modern variation of the standard model that allows product differentiation (within the traded and nontraded goods sectors) with the number of firms determined exogenously or endogenously.

  Content Type(s): Staff research, Staff working papers Topic(s): Exchange rates, Productivity JEL Code(s): F, F3, F31, F4, F41

• A Financial Conditions Index for the United States

  Staff Discussion Paper 2009-11 Kimberly Beaton, René Lalonde, Corinne Luu

  The financial crisis of 2007–09 has highlighted the importance of developments in financial conditions for real economic activity. The authors estimate the effect of current and past shocks to financial variables on U.S. GDP growth by constructing two growthbased financial conditions indexes (FCIs) that measure the contribution to quarterly (annualized) GDP growth from financial conditions.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Business fluctuations and cycles, Monetary and financial indicators, Monetary conditions index, Recent economic and financial developments JEL Code(s): E, E3, E32, E4, E44, E47, E5, E51