E43 - Interest Rates: Determination, Term Structure, and Effects

• A No-Arbitrage Analysis of Macroeconomic Determinants of Term Structures and the Exchange Rate

  Staff Working Paper 2007-21 Fousseni Chabi-Yo, Jun Yang

  We study the joint dynamics of macroeconomic variables, bond yields, and the exchange rate in an empirical two-country New-Keynesian model complemented with a no-arbitrage term structure model. With Canadian and US data, we are able to study the impact of macroeconomic shocks from both countries on their yield curves and the exchange rate.

  Content Type(s): Staff research, Staff working papers Topic(s): Debt management, Econometric and statistical methods, Exchange rates, Financial markets, Interest rates JEL Code(s): E, E1, E12, E4, E43, F, F4, F41, G, G1, G12, G15

• The Zero Bound on Nominal Interest Rates: Implications for the Optimal Monetary Policy in Canada

  Staff Discussion Paper 2007-1 Claude Lavoie, Hope Pioro

  The authors assess the performance of the Canadian economy under a variety of interest rate rules when the zero bound on nominal interest rates can bind. Their assessment is based on numerical simulations of a dynamic stochastic general-equilibrium model in a stochastic environment. Consistent with the literature, the authors find that the probability and consequences […]

  Content Type(s): Staff research, Staff discussion papers Topic(s): Inflation: costs and benefits, Interest rates, Monetary policy framework JEL Code(s): E, E4, E43, E47, E5, E52