F3 - International Finance

• The Impact of U.S. Monetary Policy Normalization on Capital Flows to Emerging-Market Economies

  Staff Working Paper 2014-53 Tatjana Dahlhaus, Garima Vasishtha

  The Federal Reserve’s path for withdrawal of monetary stimulus and eventually increasing interest rates could have substantial repercussions for capital flows to emerging-market economies (EMEs).

  Content Type(s): Staff research, Staff working papers Topic(s): International topics, Monetary policy transmission JEL Code(s): C, C3, C32, E, E5, E52, F, F3, F33, F4, F42

• The Effect of the Federal Reserve’s Tapering Announcements on Emerging Markets

  Staff Working Paper 2014-50 Vikram Rai, Lena Suchanek

  The Federal Reserve’s quantitative easing (QE) program has been accompanied by a flow of funds into emerging-market economies (EMEs) in search of higher returns.

  Content Type(s): Staff research, Staff working papers Topic(s): International financial markets, International topics, Monetary policy transmission JEL Code(s): C, C3, C33, E, E5, E58, F, F3, F32, G, G1, G14
• November 13, 2014

  Spillover Effects of Quantitative Easing on Emerging-Market Economies

  Bank of Canada Review - Autumn 2014 Robert Lavigne, Subrata Sarker, Garima Vasishtha

  While quantitative easing (QE) in the United States likely increased capital flows to emerging-market economies (EMEs), putting upward pressure on asset prices and exchange rates, diverging fundamentals between advanced economies and EMEs were also important drivers. Evidence suggests that the benefits of QE to EMEs, in higher global demand and increased confidence, appear to outweigh the costs. When advanced economies begin to normalize monetary policy, the best defence for EMEs against any potential instability is likely to be further strengthening of their macroeconomic and financial policy frameworks.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): International financial markets, International topics, Monetary policy transmission JEL Code(s): E, E5, E52, E58, F, F3, F32, F4, F41, F42

• Predicting Financial Stress Events: A Signal Extraction Approach

  Staff Working Paper 2014-37 Ian Christensen, Fuchun Li

  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.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Financial stability JEL Code(s): C, C1, C14, C4, E, E3, E37, E4, E47, F, F3, F36, F37, G, G0, G01, G1, G17

• Capital Flows and Macroprudential Policies - A Multilateral Assessment of Effectiveness and Externalities

  Staff Working Paper 2014-31 John Beirne, Christian Friedrich

  This paper assesses the effectiveness and associated externalities that arise when macroprudential policies (MPPs) are used to manage international capital flows. Using a sample of up to 139 countries, we examine the impact of eight different MPP measures on cross-border bank flows over the period 1999-2009.

  Content Type(s): Staff research, Staff working papers Topic(s): Balance of payments and components, Financial markets, International topics JEL Code(s): F, F3, F5, G, G0, G01, G1, G11
• May 13, 2014

  The Canadian Dollar as a Reserve Currency

  Bank of Canada Review - Spring 2014 Lukasz Pomorski, Francisco Rivadeneyra, Eric Wolfe

  This article provides an overview of the growth of Canadian-dollar-denominated assets in official foreign reserves. Based on International Monetary Fund data and on internal Bank of Canada analysis, we estimate that the total reserve holdings of Canadian-dollar assets increased from negligible levels before 2008 to around US$200 billion in the third quarter of 2013. We discuss the determinants of this increase, as well as its potential impact on Canadian debt markets, for example, lower yields and therefore reduced financing costs for the Government of Canada, and the possible negative impact on market liquidity.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Central bank research, Foreign reserves management, Recent economic and financial developments JEL Code(s): E, E5, E58, F, F3, F31, G, G1, G12

• Database of Sovereign Defaults, 2017

  Technical Report No. 101 David Beers, Jamshid Mavalwalla

  Until recently, there have been few efforts to systematically measure and aggregate the nominal value of the different types of sovereign government debt in default. To help fill this gap, the Bank of Canada’s Credit Rating Assessment Group (CRAG) has developed a comprehensive database of sovereign defaults posted on the Bank of Canada’s website.

  Content Type(s): Staff research, Technical reports Topic(s): Debt management, Development economics, Financial stability, International financial markets JEL Code(s): F, F3, F34, G, G1, G10, G14, G15

• Sovereign Default and State-Contingent Debt

  Staff Discussion Paper 2013-3 Martin Brooke, Rhys R. Mendes, Alex Pienkowski, Eric Santor

  The Latin American debt crises in the 1980s and the Asian crisis in the late 1990s both provided impetus for reforming the framework for restructuring sovereign debt. In the late 1980s, the Brady plan established the importance of substantive debt relief in addressing some crises.

  Content Type(s): Staff research, Staff discussion papers Topic(s): International financial markets, International topics JEL Code(s): F, F3, F34

• Why Do Emerging Markets Liberalize Capital Outflow Controls? Fiscal versus Net Capital Flow Concerns

  Staff Working Paper 2013-21 Joshua Aizenman, Gurnain Pasricha

  In this paper, we provide empirical evidence on the factors that motivated emerging economies to change their capital outflow controls in recent decades. Liberalization of capital outflow controls can allow emerging-market economies (EMEs) to reduce net capital inflow (NKI) pressures, but may cost their governments the fiscal revenues that external financial repression generates.

  Content Type(s): Staff research, Staff working papers Topic(s): Debt management, Financial system regulation and policies, International topics, Recent economic and financial developments JEL Code(s): F, F3, F32, G, G1, G15
• May 16, 2013

  Modelling the Asset-Allocation and Liability Strategy for Canada’s Foreign Exchange Reserves

  Bank of Canada Review - Spring 2013 Francisco Rivadeneyra, Jianjian Jin, Narayan Bulusu, Lukasz Pomorski

  The Bank of Canada recently developed an asset-liability-matching model to aid in the management of Canada’s foreign exchange reserves. The model allows policy-makers at the Bank and the Department of Finance to analyze asset-allocation and funding-mix decisions by quantifying both the risk-return and liquidity trade-offs for the assets, as well as the risk-cost trade-offs of the funding liabilities.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Debt management, Foreign reserves management JEL Code(s): F, F3, F31, G, G1, G11, G18