E4 - Money and Interest Rates
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The Global Financial Cycle, Monetary Policies and Macroprudential Regulations in Small, Open Economies
This paper analyzes the implications of the global financial cycle for conventional and unconventional monetary policies and macroprudential policy in small, open economies such as Canada. The paper starts by summarizing recent work on financial cycles and their growing correlation across borders. -
Starting from a Blank Page? Semantic Similarity in Central Bank Communication and Market Volatility
Press releases announcing and explaining monetary policy decisions play a critical role in the communication strategy of central banks. Because of their market-moving potential, it is particularly important how they are drafted. Often, central banks start from the previous statement and update the earlier text with only small changes. -
Relationships in the Interbank Market
In the interbank market, banks will sometimes trade below the central bank's deposit rate. We explain this anomaly using a theory based on market frictions and relationship lending. -
Global Macro Risks in Currency Excess Returns
We study a cross section of carry-trade-generated currency excess returns in terms of their exposure to global fundamental macroeconomic risk. -
Housing Market Dynamics and Macroprudential Policy
We perform an analysis to determine how well the introduction of a countercyclical loanto- value (LTV) ratio can reduce household indebtedness and housing price fluctuations compared with a monetary policy rule augmented with house price inflation. -
Financial Crisis Interventions
This paper develops a model of an economy where bank credit supports both productive investment and individual consumption smoothing in the face of idiosyncratic income risk. Bank credit is constrained by bank equity capital. -
Clearing and Settlement Systems from Around the World: A Qualitative Analysis
As Canada continues to engage in a dialogue to develop the approach to modernizing its core payment systems, we analyze the core payment systems that exist in countries around the world. We study payment systems in 27 jurisdictions, encompassing a broad range of geographic regions, through three levels of analysis. -
What Are the Macroeconomic Effects of High-Frequency Uncertainty Shocks
This paper evaluates the effects of high-frequency uncertainty shocks on a set of low-frequency macroeconomic variables that are representative of the U.S. economy. Rather than estimating models at the same common low-frequency, we use recently developed econometric models, which allows us to deal with data of different sampling frequencies. -
May 16, 2016
Estimating Canada’s Effective Lower Bound
Recently, the Bank of Canada has estimated the effective lower bound (ELB) on its policy interest rate to be about -50 basis points. This article outlines the analysis that underpins that estimate by quantifying the costs of storing and using cash in Canada. It also explores how some international markets have adapted to negative interest rates, issues surrounding their implementation, as well as their transmission to other interest rates in the economy. Finally, it discusses theoretical ideas on how the ELB could be reduced further.
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