Staff working papers

• House Prices, Consumption and the Role of Non-Mortgage Debt

  Staff Working Paper 2013-2 Katya Kartashova, Ben Tomlin

  This paper examines the relationship between house prices and consumption, through the use of debt. Using unique Canadian household-level data that reports the uses of debt, we begin by looking at the relationship between house prices and debt.

  Content Type(s): Staff research, Staff working papers Topic(s): Credit and credit aggregates, Domestic demand and components JEL Code(s): D, D1, D10, D14, D3, D31, E, E2, E21

• The Cyclicality of Sales, Regular and Effective Prices: Business Cycle and Policy Implications

  Staff Working Paper 2013-1 Olivier Coibion, Yuriy Gorodnichenko, Gee Hee Hong

  We study the cyclical properties of sales, regular price changes and average prices paid by consumers (“effective” prices) using data on prices and quantities sold for numerous retailers across many U.S. metropolitan areas.

  Content Type(s): Staff research, Staff working papers Topic(s): Inflation and prices, Monetary policy framework, Monetary policy transmission JEL Code(s): E, E3, E4, E5

• On the Welfare Effects of Credit Arrangements

  Staff Working Paper 2012-43 Jonathan Chiu, Mei Dong, Enchuan Shao

  This paper studies the welfare effects of different credit arrangements and how these effects depend on the trading mechanism and inflation. In a competitive market, a deviation from the Friedman rule is always sub-optimal. Moreover, credit arrangements can be welfare-reducing, because increased consumption by credit users will drive up the price level so that money users have to reduce consumption when facing a binding liquidity restraint.

  Content Type(s): Staff research, Staff working papers Topic(s): Credit and credit aggregates, Payment clearing and settlement systems JEL Code(s): E, E4, E40, E5, E50

• Financial Crisis Resolution

  Staff Working Paper 2012-42 Josef Schroth

  This paper studies a dynamic version of the Holmstrom-Tirole model of intermediated finance. I show that competitive equilibria are not constrained efficient when the economy experiences a financial crisis. A pecuniary externality entails that banks’ desire to accumulate capital over time aggravates the scarcity of informed capital during the financial crisis.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial markets, Financial system regulation and policies JEL Code(s): D, D5, D53, E, E6, E60, G, G0, G01, G1, G10, G18

• Estimating the Policy Rule from Money Market Rates when Target Rate Changes Are Lumpy

  Staff Working Paper 2012-41 Jean-Sébastien Fontaine

  Most central banks effect changes to their target or policy rate in discrete increments (e.g., multiples of 0.25%) following public announcements on scheduled dates. Still, for most applications, researchers rely on the assumption that the policy rate changes linearly with economic conditions and they do not distinguish between dates with and without scheduled announcements.

  Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Financial markets, Interest rates JEL Code(s): E, E4, E43, E44, E47, G, G1, G12, G13

• The Effects of Oil Price Uncertainty on the Macroeconomy

  Staff Working Paper 2012-40 Soojin Jo

  This paper investigates the effect of oil price uncertainty on real economic activity using a quarterly VAR with stochastic volatility in mean. Stochastic volatility allows oil price uncertainty to vary separately from changes in the level of oil prices, and thus the impact of oil price uncertainty can be examined in a more flexible yet tractable way.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Econometric and statistical methods JEL Code(s): C, C3, C32, E, E3, E32, Q, Q4, Q43

• Consumer Interest Rates and Retail Mutual Fund Flows

  Staff Working Paper 2012-39 Jesus Sierra

  This paper documents a link between the real and financial sides of the economy. We find that retail equity mutual fund flows in Canada are negatively related to current and past changes in a component of the prime and 5-year mortgage rates that is uncorrelated with government rates.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial services, Interest rates JEL Code(s): G, G2, G21, G23

• Liquidity and Central Clearing: Evidence from the CDS Market

  Staff Working Paper 2012-38 Joshua Slive, Jonathan Witmer, Elizabeth Woodman

  An international initiative to increase the use of central clearing for OTC derivatives emerged as one of the reactions to the 2008 financial crisis. The move to central clearing is a fundamental change in the structure of the market.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial markets JEL Code(s): G, G3, G30, G38

• Forecasting Inflation and the Inflation Risk Premiums Using Nominal Yields

  Staff Working Paper 2012-37 Bruno Feunou, Jean-Sébastien Fontaine

  We provide a decomposition of nominal yields into real yields, expectations of future inflation and inflation risk premiums when real bonds or inflation swaps are unavailable or unreliable due to their relative illiquidity.

  Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Econometric and statistical methods, Inflation and prices, Interest rates JEL Code(s): E, E4, E43, E47, G, G1, G12

• The Role of Credit in International Business Cycles

  Staff Working Paper 2012-36 TengTeng Xu

  This paper examines the role of bank credit in modeling and forecasting business cycle fluctuations, and investigates the international transmission of US credit shocks, using a global vector autoregressive (GVAR) framework and associated country-specific error correction models.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Credit and credit aggregates, Econometric and statistical methods, International financial markets JEL Code(s): C, C3, C32, E, E3, E32, E4, E44, G, G2, G21