E4 - Money and Interest Rates

• Noisy Monetary Policy

  Staff Working Paper 2018-23 Tatjana Dahlhaus, Luca Gambetti

  We introduce limited information in monetary policy. Agents receive signals from the central bank revealing new information (“news") about the future evolution of the policy rate before changes in the rate actually take place. However, the signal is disturbed by noise.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Econometric and statistical methods, Financial markets, Monetary policy implementation, Monetary policy transmission JEL Code(s): C, C1, C18, C3, C32, E, E0, E02, E4, E43, E5, E52

• Uncovered Return Parity: Equity Returns and Currency Returns

  Staff Working Paper 2018-22 Edouard Djeutem, Geoffrey R. Dunbar

  We propose an uncovered expected returns parity (URP) condition for the bilateral spot exchange rate. URP implies that unilateral exchange rate equations are misspecified and that equity returns also affect exchange rates. Fama regressions provide evidence that URP is statistically preferred to uncovered interest rate parity (UIP) for nominal bilateral exchange rates between the US dollar and six countries (Australia, Canada, Japan, Norway, Switzerland and the UK) at the monthly frequency.

  Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Exchange rates, International financial markets JEL Code(s): E, E4, E43, F, F3, F31, G, G1, G15

• The (Un)Demand for Money in Canada

  Staff Working Paper 2018-20 Casey Jones, Geoffrey R. Dunbar

  A novel dataset from the Bank of Canada is used to estimate the deposit functions for banknotes in Canada for three denominations: $1,000, $100 and $50. The broad flavour of the empirical findings is that denominations are different monies, and the structural estimates identify the underlying sources of the non-neutrality.

  Content Type(s): Staff research, Staff working papers Topic(s): Bank notes, Econometric and statistical methods JEL Code(s): C, C3, C31, C36, E, E4, E41