Uncategorized

• August 16, 2012

  Global Risk Premiums and the Transmission of Monetary Policy

  Bank of Canada Review - Summer 2012 Gregory Bauer, Antonio Diez de los Rios

  An important channel in the transmission of monetary policy is the relationship between the short-term policy rate and long-term interest rates. Using a new term-structure model, the authors show that the variation in long-term interest rates over time consists of two components: one representing investor expectations of future policy rates, and another reflecting a term-structure risk premium that compensates investors for holding a risky asset. The time variation in the term-structure risk premium is countercyclical and largely determined by global macroeconomic conditions. As a result, long-term rates are pushed up during recessions and down during times of expansion. This is an important phenomenon that central banks need to take into account when using short-term rates as a policy tool.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Asset pricing, Financial markets, Monetary policy transmission JEL Code(s): E, E4, E43, F, F3, F31, G, G1, G12, G15
• August 16, 2012

  An Analysis of Indicators of Balance-Sheet Risks at Canadian Financial Institutions

  Bank of Canada Review - Summer 2012 David Xiao Chen, H. Evren Damar, Hani Soubra, Yaz Terajima

  This article examines four indicators of balance-sheet risks—leverage, capital, asset liquidity and funding—among different types of financial institutions in Canada over the past three decades. It also discusses relevant developments in the banking sector that could have contributed to the observed dynamics. The authors find that the various risk indicators decreased during the period for most of the non-Big Six financial institutions, but remained relatively unchanged for the Big Six banks. In addition, the balance-sheet risk indicators became more heterogeneous across financial institutions. The observed overall decline and increased heterogeneity follow certain regulatory changes, such as the introduction of the liquidity guidelines on funding in 1995 and the implementation of bank-specific leverage requirements in 2000. Given that these regulations required more balance-sheet risk management, they have likely contributed to the increased resilience of the banking sector.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Financial institutions, Financial stability, Financial system regulation and policies JEL Code(s): G, G2, G21, G28
• August 3, 2012

  Bank of Canada Publishes 2013 Schedule for Policy Interest Rate Announcements and Monetary Policy Report Releases

  Media Relations Ottawa, Ontario

  The Bank of Canada released its 2013 schedule of key policy interest rate announcements and quarterly Monetary Policy Reports (MPR), and announced that in 2013, it will begin concurrent publication of the MPR with its January, April, July, and October rate announcements.

  Content Type(s): Press, Press releases

• Why Do Shoppers Use Cash? Evidence from Shopping Diary Data

  Staff Working Paper 2012-24 Naoki Wakamori, Angelika Welte

  Recent studies find that cash remains a dominant payment choice for small-value transactions despite the prevalence of alternative means of payment such as debit and credit cards. For policy makers an important question is whether consumers truly prefer using cash or merchants restrict card usage.

  Content Type(s): Staff research, Staff working papers Topic(s): Bank notes, Econometric and statistical methods, Financial services JEL Code(s): C, C2, D, D1, G, G2

• The Ex-Ante Versus Ex-Post Effect of Public Guarantees

  Staff Working Paper 2012-22 H. Evren Damar, Reint Gropp, Adi Mordel

  In October 2006, Dominion Bond Rating Service (DBRS) introduced new ratings for banks that account for the potential of government support. The rating changes are not a reflection of any changes in the respective banks’ credit fundamentals.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial stability, Financial system regulation and policies JEL Code(s): G, G2, G21, G28, G3, G32

• Unconventional Monetary Policy and the Great Recession: Estimating the Macroeconomic Effects of a Spread Compression at the Zero Lower Bound

  Staff Working Paper 2012-21 Christiane Baumeister, Luca Benati

  We explore the macroeconomic effects of a compression in the long-term bond yield spread within the context of the Great Recession of 2007-2009 via a time-varying parameter structural VAR model.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Interest rates, Monetary policy framework, Monetary policy transmission JEL Code(s): C, C1, C11, C3, C32, E, E5, E52, E58

• International Business Cycles and Financial Frictions

  Staff Working Paper 2012-19 Wen Yao

  This paper builds a two-country DSGE model to study the quantitative impact of financial frictions on business cycle co-movements when investors have foreign asset exposure. The investor in each country holds capital in both countries and faces a leverage constraint on her debt.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, International financial markets, International topics JEL Code(s): E, E3, E30, F, F4, F42, F44

• Consumer Bankruptcy and Information

  Staff Working Paper 2012-18 Jason Allen, H. Evren Damar, David Martinez-Miera

  We analyze the relationship between the intensity of banks’ use of soft-information and household bankruptcy patterns. Using a unique data set on the universe of Canadian household bankruptcies, we document that bankruptcy rates are higher in markets where the collection of soft, or qualitative locally gathered information, is the weakest.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial services JEL Code(s): D, D4, G, G2
• July 18, 2012

  Release of the Monetary Policy Report

  Opening statement Mark Carney Ottawa, Ontario

  Press conference following the release of the Monetary Policy Report.

  Content Type(s): Press, Speeches and appearances, Opening statements
• July 18, 2012

  Monetary Policy Report – July 2012

  

  The Bank projects that the economy will grow by 2.1 per cent in 2012, 2.3 per cent in 2013 and 2.5 per cent in 2014. The economy is expected to reach full capacity in the second half of 2013.

  Content Type(s): Publications, Monetary Policy Report