Staff working papers
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The Syndicated Loan Market: Developments in the North American Context
The author describes the rapid development of the syndicated corporate loan market in the 1990s. He explores the historical forces that led to the development of the contemporary U.S. syndicated loan market, which is effectively a hybrid of the investment banking and commercial banking worlds. -
An Index of Financial Stress for Canada
The authors develop an index of financial stress for the Canadian financial system. Stress is defined as the force exerted on economic agents by uncertainty and changing expectations of loss in financial markets and institutions. -
Un modèle « PAC » d'analyse et de prévision des dépenses des ménages américains
Traditional structural models cannot distinguish whether changes in activity are a function of altered expectations today or lagged responses to past plans. Polynomial-adjustment-cost (PAC) models remove this ambiguity by explicitly separating observed dynamic behaviour into movements that have been induced by changes in expectations, and responses to expectations, that have been delayed because of adjustment costs. -
The Macroeconomic Effects of Military Buildups in a New Neoclassical Synthesis Framework
The authors study the macroeconomic consequences of large military buildups using a New Neoclassical Synthesis (NNS) approach that combines nominal rigidities within imperfectly competitive goods and labour markets. They show that the predictions of the NNS framework generally are consistent with the sign, timing, and magnitude of how hours worked, after-tax real wages, and output actually respond to an upsurge in military purchases. -
Collateral and Credit Supply
The author examines the role of collateral in an environment where lenders and borrowers possess identical information and similar beliefs about its future value. Using option-pricing techniques, he shows that a secured loan contract is equivalent to a regular bond and an embedded option to the borrower to default. -
A Stochastic Simulation Framework for the Government of Canada's Debt Strategy
Debt strategy is defined as the manner in which a government finances an excess of government expenditures over revenues and any maturing debt issued in previous periods. The author gives a thorough qualitative description of the complexities of debt strategy analysis and then demonstrates that it is, in fact, a problem in stochastic optimal control. -
Bank Lending, Credit Shocks, and the Transmission of Canadian Monetary Policy
The authors use a dynamic general-equilibrium model to study the role financial frictions play as a transmission mechanism of Canadian monetary policy, and to evaluate the real effects of exogenous credit shocks. Financial frictions, which are modelled as spreads between deposit and loan interest rates, are assumed to depend on economic activity as well as on credit shocks. -
Comparing Alternative Output-Gap Estimators: A Monte Carlo Approach
The author evaluates the ability of a variety of output-gap estimators to accurately measure the output gap in a model economy. A small estimated model of the Canadian economy is used to generate artificial data. -
Testing the Stability of the Canadian Phillips Curve Using Exact Methods
Postulating two different specifications for the Canadian Phillips curve (a purely backwardlooking model, and a partly backward-, partly forward-looking model), the authors test for structural breaks in the parameters of the equation. In each case, they account for the possibilities that: (i) breaks can be discrete, or continuous, and (ii) available data samples may be too small to justify using asymptotically valid structural-change tests.