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November 11, 2009
Declining Inflation Persistence in Canada: Causes and Consequences
The persistence of both core and total consumer price index inflation in Canada has declined significantly since the 1980s. In addition to providing up-to-date estimates of inflation persistence, this article examines possible reasons for the decline suggested in the literature. The role played by monetary policy, through its effect on price- and wage-setting behaviour, is distinguished from possible changes to the structure of the economy that are independent of monetary policy. The authors also discuss the implications for monetary policy of low structural persistence in inflation, including the choice of an inflation-targeting regime versus a price-level-targeting regime. -
Equity Option-Implied Probability of Default and Equity Recovery Rate
There is a close link between prices of equity options and the default probability of a firm. We show that in the presence of positive expected equity recovery, standard methods that assume zero equity recovery at default misestimate the option-implied default probability. -
The U.S. Stock Market and Fundamentals: A Historical Decomposition
The authors identify the fundamentals behind the dynamics of the U.S. stock market over the past 30 years. They specify a structural vector-error-correction model following the methodology of King, Plosser, Stock, and Watson (1991). -
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News-Driven International Credit Cycles
This paper examines the implications of positive news about future asset values that turn out to be incorrect at a later date in an open economy model with banking. The model captures the patterns of bank credit and current account dynamics in Spain between 2000 and 2010. The model finds that the use of unconventional policies leads to a milder bust. -
Central Bank Communication or the Media’s Interpretation: What Moves Markets?
The goal of this paper is to investigate what type of information from Bank of Canada communication statements or the market commentary based on these statements has a significant effect on the volatility or level of returns in a short-term interest rate market. -
August 10, 2010
Counterfeit prevention
Learn why it’s important to check your notes, and how to deal with suspicious money. -
Reputational Risk Management in Central Banks
This paper discusses reputational risk in the context of central banking and explains why it matters to central banks. It begins with a general discussion of reputational risk within the broader framework of risk management.