E - Macroeconomics and Monetary Economics

• An International Dynamic Term Structure Model with Economic Restrictions and Unspanned Risks

  Staff Working Paper 2012-5 Gregory Bauer, Antonio Diez de los Rios

  We construct a multi-country affine term structure model that contains unspanned macroeconomic and foreign exchange risks. The canonical version of the model is derived and is shown to be easy to estimate.

  Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Exchange rates, Interest rates JEL Code(s): E, E4, E43, F, F3, F31, G, G1, G12, G15

• Fooled by Search: Housing Prices, Turnover and Bubbles

  Staff Working Paper 2012-3 Brian Peterson

  his paper develops and estimates a model to explain the behaviour of house prices in the United States. The main finding is that over 70% of the increase in house prices relative to trend during the increase of house prices in the United States from 1995 to 2006 can be explained by a pricing mechanism where market participants are ‘Fooled by Search.’

  Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Business fluctuations and cycles JEL Code(s): E, E3, R, R2, R21

• A Foreign Activity Measure for Predicting Canadian Exports

  Staff Discussion Paper 2012-1 Louis Morel

  The author constructs a measure of foreign activity that takes into account the composition of foreign demand for Canadian exports. It has a number of interesting features.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Balance of payments and components, Exchange rates, Recent economic and financial developments JEL Code(s): E, E0, E00, F, F1, F17

• Time-Varying Effects of Oil Supply Shocks on the U.S. Economy

  Staff Working Paper 2012-2 Christiane Baumeister, Gert Peersman

  We use vector autoregressions with drifting coefficients and stochastic volatility to investigate how the dynamic effects of oil supply shocks on the U.S. economy have changed over time. We find a substantial decline in the short-run price elasticity of oil demand since the mid-eighties.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, International topics JEL Code(s): E, E3, E31, E32, Q, Q4, Q43

• Real-Time Analysis of Oil Price Risks Using Forecast Scenarios

  Staff Working Paper 2012-1 Christiane Baumeister, Lutz Kilian

  Recently, there has been increased interest in real-time forecasts of the real price of crude oil. Standard oil price forecasts based on reduced-form regressions or based on oil futures prices do not allow consumers of forecasts to explore how much the forecast would change relative to the baseline forecast under alternative scenarios about future oil demand and oil supply conditions.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, International topics JEL Code(s): C, C5, C53, E, E3, E32, Q, Q4, Q43

• Bank Leverage Regulation and Macroeconomic Dynamics

  Staff Working Paper 2011-32 Ian Christensen, Césaire Meh, Kevin Moran

  This paper assesses the merits of countercyclical bank balance sheet regulation for the stabilization of financial and economic cycles and examines its interaction with monetary policy.

  Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Financial institutions, Financial system regulation and policies, Monetary policy framework, Monetary policy transmission JEL Code(s): E, E4, E44, E5, E52, G, G2, G21

• Do Low Interest Rates Sow the Seeds of Financial Crises?

  Staff Working Paper 2011-31 Simona Cociuba, Malik Shukayev, Alexander Ueberfeldt

  A view advanced in the aftermath of the late-2000s financial crisis is that lower than optimal interest rates lead to excessive risk taking by financial intermediaries.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial system regulation and policies, Monetary policy transmission JEL Code(s): D, D5, D53, E, E4, E44, E5, E52, G, G2, G28

• Trading Dynamics with Adverse Selection and Search: Market Freeze, Intervention and Recovery

  Staff Working Paper 2011-30 Jonathan Chiu, Thorsten Koeppl

  We study the trading dynamics in an asset market where the quality of assets is private information of the owner and finding a counterparty takes time. When trading of a financial asset ceases in equilibrium as a response to an adverse shock to asset quality, a large player can resurrect the market by buying up lemons which involves assuming financial losses.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial markets, Financial stability JEL Code(s): E, E6, G, G1

• Financial Frictions, Financial Shocks and Labour Market Fluctuations in Canada

  Staff Discussion Paper 2011-10 Yahong Zhang

  What are the effects of financial market imperfections on unemployment and vacancies in Canada? The author estimates the model of Zhang (2011) – a standard monetary dynamic stochastic general-equilibrium model augmented with explicit financial and labour market frictions – with Canadian data for the period 1984Q2–2010Q4, and uses it to examine the importance of financial shocks on labour market fluctuations in Canada.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Economic models, Financial markets, Labour markets JEL Code(s): E, E3, E32, E4, E44, J, J6

• The Role of Time-Varying Price Elasticities in Accounting for Volatility Changes in the Crude Oil Market

  Staff Working Paper 2011-28 Christiane Baumeister, Gert Peersman

  There has been a systematic increase in the volatility of the real price of crude oil since 1986, followed by a decline in the volatility of oil production since the early 1990s. We explore reasons for this evolution. We show that a likely explanation of this empirical fact is that both the short-run price elasticities of oil demand and of oil supply have declined considerably since the second half of the 1980s.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, International topics JEL Code(s): E, E3, E31, E32, Q, Q4, Q43