Staff research

• Monetary Policy Tradeoffs Between Financial Stability and Price Stability

  Staff Working Paper 2016-49 Malik Shukayev, Alexander Ueberfeldt

  We analyze the impact of interest rate policy on financial stability in an environment where banks can experience runs on their short-term liabilities, forcing them to sell assets at fire-sale prices.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial stability, Monetary policy framework, Monetary policy transmission JEL Code(s): D, D6, D62, E, E3, E32, E4, E44, G, G0, G01

• Business Cycles in Small, Open Economies: Evidence from Panel Data Between 1900 and 2013

  Staff Working Paper 2016-48 Thuy Lan Nguyen, Wataru Miyamoto

  Using a novel data set for 17 countries dating from 1900 to 2013, we characterize business cycles in both small developed and developing countries in a model with financial frictions and a common shock structure. We estimate the model jointly for these 17 countries using Bayesian methods.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Economic models, International topics JEL Code(s): E, E1, E13, E3, E32, F, F4, F41, F44

• Managing Risk Taking with Interest Rate Policy and Macroprudential Regulations

  Staff Working Paper 2016-47 Simona Cociuba, Malik Shukayev, Alexander Ueberfeldt

  We develop a model in which a financial intermediary’s investment in risky assets—risk taking—is excessive due to limited liability and deposit insurance and characterize the policy tools that implement efficient risk taking.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial system regulation and policies, Monetary policy framework JEL Code(s): E, E4, E44, E5, E52, G, G1, G11, G18

• Fragility of Resale Markets for Securitized Assets and Policy of Asset Purchases

  Staff Working Paper 2016-46 Martin Kuncl

  Markets for securitized assets were characterized by high liquidity prior to the recent financial crisis and by a sudden market dry-up at the onset of the crisis. A general equilibrium model with heterogeneous investment opportunities and information frictions predicts that, in boom periods or mild recessions, the degree of adverse selection in resale markets for securitized assets is limited because of the reputation-based guarantees by asset originators.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Credit and credit aggregates, Economic models, Financial markets, Financial stability, Financial system regulation and policies JEL Code(s): E, E3, E32, E5, G, G0, G01, G2
• October 31, 2016

  Research Update - October 2016

  This monthly newsletter features the latest research publications by Bank of Canada economists including external publications and working papers published on the Bank of Canada’s website.

  Content Type(s): Staff research, Research newsletters

• Interpreting Volatility Shocks as Preference Shocks

  Staff Working Paper 2016-45 Shaofeng Xu

  This paper examines the relationship between volatility shocks and preference shocks in an analytically tractable endogenous growth model with recursive preferences and stochastic volatility. I show that there exists an explicit mapping between volatility shocks and preference shocks, and a rise in volatility generates the same impulse responses of macroeconomic aggregates as a negative preference shock.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Economic models JEL Code(s): E, E2, E3
• September 30, 2016

  Research Update - September 2016

  This monthly newsletter features the latest research publications by Bank of Canada economists including external publications and working papers published on the Bank of Canada’s website.

  Content Type(s): Staff research, Research newsletters

• Financial Constraint and Productivity: Evidence from Canadian SMEs

  Staff Working Paper 2016-44 Shutao Cao, Danny Leung

  The degree to which financial constraint is binding is often not directly observable in commonly used business data sets (e.g., Compustat). In this paper, we measure and estimate the likelihood of a firm being constrained by external financing using a data set of small- and medium-sized Canadian firms.

  Content Type(s): Staff research, Staff working papers Topic(s): Firm dynamics, Productivity JEL Code(s): D, D2, D24, G, G3, G32, L, L2, L25

• The Paul Storer Memorial Lecture—Cross-Border Trade Integration and Monetary Policy

  Staff Discussion Paper 2016-20 Stephen S. Poloz

  In this paper we explore the nexus between cross-border trade integration and monetary policy. We first review the evidence that trade liberalization has increased the degree of integration in North America and conclude that, while robust structural inferences remain elusive, there is sufficient supporting evidence for central banks to treat the issue seriously.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Economic models, Monetary policy, Trade integration JEL Code(s): E, E3, E37, E5, F, F1, F4, F41, F6

• On What States Do Prices Depend? Answers from Ecuador

  Staff Working Paper 2016-43 Craig Benedict, Mario J. Crucini, Anthony Landry

  In this paper, we argue that differences in the cost structures across sectors play an important role in firms’ decisions to adjust their prices. We develop a menu-cost model of pricing in which retail firms intermediate trade between producers and consumers.

  Content Type(s): Staff research, Staff working papers Topic(s): Inflation and prices, Monetary policy transmission JEL Code(s): E, E3, E5, F, F3, F33