Staff research, Publications
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Optimal Monetary Policy and Price Stability Over the Long-Run
This paper examines the role of monetary policy in an environment with aggregate risk and incomplete markets. In a two-period overlapping-generations model with aggregate uncertainty and nominal bonds, optimal monetary policy attains the ex-ante Pareto optimal allocation. -
Managing Adverse Dependence for Portfolios of Collateral in Financial Infrastructures
We propose a framework that allows a portfolio manager to quantify the probability of simultaneous losses in multiple assets of a collateral portfolio. Using this framework, we propose a methodology to conduct stress tests on the market value of the portfolio of collateral when undesirable extreme dependence occurs. -
Corporate Balance Sheets in Developed Economies: Implications for Investment
In this paper, the authors examine the aggregate national balance-sheets of non-financial corporations in Australia and the G7 countries with a view to assessing both their financial structure and their financial position. More importantly, the authors investigate whether the financial position of non-financial corporations (i.e., debt-to-equity ratio) is material to the economy's investment prospects and whether the importance of this channel differs depending on the structure of corporate financing i.e., bank-based or market-oriented financing structures. -
Order Aggressiveness and Quantity: How Are They Determined in a Limit Order Market?
Dealers trading in a limit order market must choose both the order aggressiveness and the quantity for their orders. We empirically investigate how dealers jointly make these decisions in the foreign exchange market using a unique simultaneous equations model. -
IMF-Supported Adjustment Programs: Welfare Implications and the Catalytic Effect
The author studies the welfare implications of adjustment programs supported by the International Monetary Fund (IMF). He uses a model where an endogenous borrowing constraint, set up by international lenders who will never lend more than a debt ceiling, forces the borrowing economy to always choose repayment over default. -
A No-Arbitrage Analysis of Macroeconomic Determinants of Term Structures and the Exchange Rate
We study the joint dynamics of macroeconomic variables, bond yields, and the exchange rate in an empirical two-country New-Keynesian model complemented with a no-arbitrage term structure model. With Canadian and US data, we are able to study the impact of macroeconomic shocks from both countries on their yield curves and the exchange rate. -
Multivariate Realized Stock Market Volatility
We present a new matrix-logarithm model of the realized covariance matrix of stock returns. The model uses latent factors which are functions of both lagged volatility and returns. -
The Zero Bound on Nominal Interest Rates: Implications for the Optimal Monetary Policy in Canada
The authors assess the performance of the Canadian economy under a variety of interest rate rules when the zero bound on nominal interest rates can bind. Their assessment is based on numerical simulations of a dynamic stochastic general-equilibrium model in a stochastic environment. Consistent with the literature, the authors find that the probability and consequences […] -
Perhaps the FOMC Did What It Said It Did: An Alternative Interpretation of the Great Inflation
This paper uses real-time briefing forecasts prepared for the Federal Open Market Committee (FOMC) to provide estimates of historical changes in the design of U.S. monetary policy and in the implied central-bank target for inflation. Empirical results support a description of policy with an effective inflation target of roughly 7 percent in the 1970s.