E4 - Money and Interest Rates
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The Neutral Rate of Interest in Canada
A measure of the neutral policy interest rate can be used to gauge the stance of monetary policy. We define the neutral rate as the real policy rate consistent with output at its potential level and inflation equal to target after the effects of all cyclical shocks have dissipated. -
Improving Public Equity Markets? No Pain, No Gain
This paper quantifies the effects of improving public equity markets on macroeconomic aggregates and welfare. I use an open-economy extension of Angeletos (2007), where entrepreneurs face idiosyncratic productivity risk in privately held firms. -
Predicting Financial Stress Events: A Signal Extraction Approach
The objective of this paper is to propose an early warning system that can predict the likelihood of the occurrence of financial stress events within a given period of time. To achieve this goal, the signal extraction approach proposed by Kaminsky, Lizondo and Reinhart (1998) is used to monitor the evolution of a number of economic indicators that tend to exhibit an unusual behaviour in the periods preceding a financial stress event. -
Search Frictions, Financial Frictions and Labour Market Fluctuations in Emerging Markets
This paper examines the role of the extensive and intensive margins of labour input in the context of a business cycle model with a financial friction. We document significant variation in the hours worked per worker for many emerging-market economies. Both employment and hours worked per worker are positively correlated with each other and with output. -
Forecasting Short-Term Real GDP Growth in the Euro Area and Japan Using Unrestricted MIDAS Regressions
In this paper, the authors develop a new tool to improve the short-term forecasting of real GDP growth in the euro area and Japan. This new tool, which uses unrestricted mixed-data sampling (U-MIDAS) regressions, allows an evaluation of the usefulness of a wide range of indicators in predicting short-term real GDP growth. -
Retail Payment Innovations and Cash Usage: Accounting for Attrition Using Refreshment Samples
We exploit the panel dimension of the Canadian Financial Monitor (CFM) data to estimate the impact of retail payment innovations on cash usage. We estimate a semiparametric panel data model that accounts for unobserved heterogeneity and allows for general forms of non-random attrition. -
Improving Overnight Loan Identification in Payments Systems
Information on the allocation and pricing of over-the-counter (OTC) markets is scarce. Furfine (1999) pioneered an algorithm that provides transaction-level data on the OTC interbank lending market. -
Understanding the Cash Demand Puzzle
We develop a model to explain a puzzling trend in cash demand in recent years: the value of bank notes in circulation as a percentage of GDP has remained stable despite decreasing cash usage at points of sale owing to competition from alternative means of payment such as credit cards. -
Monetary Policy Transmission during Financial Crises: An Empirical Analysis
This paper studies the effects of a monetary policy expansion in the United States during times of high financial stress. The analysis is carried out by introducing a smooth transition factor model where the transition between states (“normal” and high financial stress) depends on a financial conditions index.