International topics

• Effectiveness of Capital Controls in India: Evidence from the Offshore NDF Market

  Staff Working Paper 2011-29 Michael Hutchison, Gurnain Pasricha, Nirvikar Singh

  This paper examines the effectiveness of international capital controls in India over time by analyzing daily return differentials in the non-deliverable forward (NDF) markets using the self-exciting threshold autoregressive (SETAR) methodology.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, International financial markets, International topics JEL Code(s): F, F3, F31, F32, G, G1, G15

• The Role of Time-Varying Price Elasticities in Accounting for Volatility Changes in the Crude Oil Market

  Staff Working Paper 2011-28 Christiane Baumeister, Gert Peersman

  There has been a systematic increase in the volatility of the real price of crude oil since 1986, followed by a decline in the volatility of oil production since the early 1990s. We explore reasons for this evolution. We show that a likely explanation of this empirical fact is that both the short-run price elasticities of oil demand and of oil supply have declined considerably since the second half of the 1980s.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, International topics JEL Code(s): E, E3, E31, E32, Q, Q4, Q43
• November 17, 2011

  The International Monetary System: An Assessment and Avenue for Reform

  Bank of Canada Review - Autumn 2011 Lawrence L. Schembri, Eric Santor

  The current international monetary system is in need of reform. This article first provides an assessment of the existing system, highlighting both its strengths and weaknesses. It notes that the system has not facilitated the symmetric and timely adjustment in the real exchange rate necessary to accommodate the integration of China and other emerging-market economies into the global economy. This lack of adjustment contributed to the global financial crisis and recession and, because it is forestalling the required rotation of global demand, is hindering the global recovery. The article then discusses reform of the system that would see all systemically important countries and currency areas adopt market-based and convertible floating exchange rates supported by appropriate monetary, fiscal and financial sector policy frameworks. It also examines the roles of the G-20 countries and major international financial institutions in promoting and facilitating the system’s transition.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Exchange rate regimes, International topics

• Determinants of Financial Stress and Recovery during the Great Recession

  Staff Working Paper 2011-24 Joshua Aizenman, Gurnain Pasricha

  In this paper, we explore the link between stress in the domestic financial sector and the capital flight faced by countries in the 2008-9 global crisis. Both the timing of emergence of internal financial stress in developing economies, and the size of the peak-trough declines in the stock price indices was comparable to that in high income countries, indicating that there was no decoupling, even before Lehman Brothers’ demise.

  Content Type(s): Staff research, Staff working papers Topic(s): Balance of payments and components, Financial markets, International topics JEL Code(s): F, F3, F32, G, G1, G15

• Exchange Rates and Individual Good’s Price Misalignment: Some Preliminary Evidence of Long-Horizon Predictability

  Staff Discussion Paper 2011-8 Wei Dong, Deokwoo Nam

  When prices are sticky, movements in the nominal exchange rate have a direct impact on international relative prices. A relative price misalignment would trigger an adjustment in consumption and employment, and may help to predict future movements in the exchange rate.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Exchange rates, International topics JEL Code(s): F, F3, F31, F4, F47

• Real-Time Forecasts of the Real Price of Oil

  Staff Working Paper 2011-16 Christiane Baumeister, Lutz Kilian

  We construct a monthly real-time data set consisting of vintages for 1991.1-2010.12 that is suitable for generating forecasts of the real price of oil from a variety of models.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, International topics JEL Code(s): C, C5, C53, E, E3, E32, Q, Q4, Q43

• The Role of Financial Speculation in Driving the Price of Crude Oil

  Staff Discussion Paper 2011-6 Ron Alquist, Olivier Gervais

  Over the past 10 years, financial firms have increased the size of their positions in the oil futures market. At the same time, oil prices have increased dramatically.

  Content Type(s): Staff research, Staff discussion papers Topic(s): International topics JEL Code(s): G, G1, G12, Q, Q4, Q41

• External Stability, Real Exchange Rate Adjustment and the Exchange Rate Regime in Emerging-Market Economies

  Staff Discussion Paper 2011-5 Olivier Gervais, Lawrence L. Schembri, Lena Suchanek

  In emerging-market economies, real exchange rate adjustment is critical for maintaining a sustainable current account position and thereby for helping to reduce macroeconomic and financial instability.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Development economics, Exchange rate regimes, International topics JEL Code(s): F, F3, F31, F32, F4, F41

• Forecasting the Price of Oil

  Staff Working Paper 2011-15 Ron Alquist, Lutz Kilian, Robert Vigfusson

  We address some of the key questions that arise in forecasting the price of crude oil. What do applied forecasters need to know about the choice of sample period and about the tradeoffs between alternative oil price series and model specifications?

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, International topics JEL Code(s): C, C5, C53, Q, Q4, Q43, Q47
• May 19, 2011

  Unconventional Monetary Policy: The International Experience with Central Bank Asset Purchases

  Bank of Canada Review - Spring 2011 Sharon Kozicki, Lena Suchanek, Eric Santor

  As part of their policy response to the financial crisis of 2007–09, central banks introduced numerous unprecedented monetary policy measures to provide monetary easing. This article defines and documents these measures, focusing on central bank asset purchases and their impact on central bank balance sheets. It then discusses the challenges of identifying the effects of these measures and explores possible exit strategies. The potential costs of these policies are also analyzed, as well as the broader implications for monetary policy frameworks.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Central bank research, Financial markets, International topics, Monetary policy framework