E44 - Financial Markets and the Macroeconomy
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Monetary Policy in an Estimated DSGE Model with a Financial Accelerator
The authors estimate a sticky-price dynamic stochastic general-equilibrium model with a financial accelerator, à la Bernanke, Gertler, and Gilchrist (1999), to assess the importance of financial frictions in the amplification and propagation of the effects of transitory shocks. -
The Canadian Macroeconomy and the Yield Curve: An Equilibrium-Based Approach
The authors develop and estimate an equilibrium-based model of the Canadian term structure of interest rates. -
The Impact of Unanticipated Defaults in Canada's Large Value Transfer System
Canada's Large Value Transfer System (LVTS) is designed to meet international risk-proofing standards at a minimum cost to participants in terms of collateral requirements. -
Financial Market Imperfection, Overinvestment, and Speculative Precaution
The author uses panel data to assess the sensitivity of investment to cash flow in non-financial firms, taking into account the role their financial health plays in investment decisions. -
Convergence of Government Bond Yields in the Euro Zone: The Role of Policy Harmonization
Since the early 1980s, long-term government bond yields in the euro zone have declined, in line with those in other industrialized countries. -
Financial Conditions Indexes for Canada
The authors construct three financial conditions indexes (FCIs) for Canada based on three approaches: an IS-curve-based model, generalized impulse-response functions, and factor analysis. -
Bank Capital, Agency Costs, and Monetary Policy
Evidence suggests that banks, like firms, face financial frictions when raising funds. -
Simple Monetary Policy Rules in an Open-Economy, Limited-Participation Model
The authors assess the stabilization properties of simple monetary policy rules within the context of a small open-economy model constructed around the limited-participation assumption and calibrated to salient features of the Canadian economy. By relying on limited participation as the main nominal friction that affects the artificial economy, the authors provide an important check of the robustness of the results obtained using alternative environments in the literature on monetary policy rules, most notably the now-standard "New Keynesian" paradigm that emphasizes rigidities in the price-setting mechanism. -
Excess Collateral in the LVTS: How Much is Too Much?
The authors build a theoretical model that generates demand for collateral by Large Value Transfer System (LVTS) participants under the assumption that they minimize the cost of holding and managing collateral for LVTS purposes. The model predicts that the optimal amount of collateral held by each LVTS participant depends on the opportunity cost of collateral, the transactions costs of acquiring assets used as collateral and transferring them in and out of the LVTS, and the distribution of an LVTS participant's payment flows in the LVTS.