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Has the Inclusion of Forward-Looking Statements in Monetary Policy Communications Made the Bank of Canada More Transparent?

Staff Discussion Paper 2010-15 Christine Fay, Toni Gravelle
To investigate the extent to which the transparency of the Bank of Canada's monetary policy has improved, the authors examine empirically – over the period 30 October 2000 to 31 May 2007 – the reaction of Canadian financial markets to official Bank communications, and in particular their reaction to the recent inclusion of forward-looking policy-rate guidance in these communications.

Stability versus Flexibility: The Role of Temporary Employment in Labour Adjustment

Staff Working Paper 2010-27 Shutao Cao, Danny Leung
In Canada, temporary workers account for 14 per cent of jobs in the non-farm business sector, are present in a range of industries, and account for 40 per cent of the total job reallocation. Yet most models of job reallocation abstract from temporary workers.
Content Type(s): Staff research, Staff working papers Topic(s): Labour markets, Productivity JEL Code(s): D, D2, D24, J, J3, J32

Capital Requirement and Financial Frictions in Banking: Macroeconomic Implications

Staff Working Paper 2010-26 Ali Dib
The author develops a dynamic stochastic general-equilibrium model with an active banking sector, a financial accelerator, and financial frictions in the interbank and bank capital markets.

Losses from Simulated Defaults in Canada's Large Value Transfer System

Staff Discussion Paper 2010-14 Nellie Zhang, Tom Hossfeld
The Large Value Transfer System (LVTS) loss-sharing mechanism was designed to ensure that, in the event of a one-participant default, the collateral pledged by direct members of the system would be sufficient to cover the largest possible net debit position of a defaulting participant. However, the situation may not hold if the indirect effects of the defaults are taken into consideration, or if two participants default during the same payment cycle.

The Effect of Exchange Rate Movements on Heterogeneous Plants: A Quantile Regression Analysis

Staff Working Paper 2010-25 Ben Tomlin, Loretta Fung
In this paper, we examine how the effect of movements in the real exchange rate on manufacturing plants depends on the plant's placement within the productivity distribution. Appreciations of the local currency expose domestic plants to more competition from abroad as export opportunities shrink and import competition intensifies.

Central Bank Haircut Policy

Staff Working Paper 2010-23 James Chapman, Jonathan Chiu, Miguel Molico
We present a model of central bank collateralized lending to study the optimal choice of the haircut policy. We show that a lending facility provides a bundle of two types of insurance: insurance against liquidity risk as well as insurance against downside risk of the collateral.

Nowcasting the Global Economy

Staff Discussion Paper 2010-12 James Rossiter
Forecasts of global economic activity and inflation are important inputs when conducting monetary policy in small open economies such as Canada. As part of the Bank of Canada's broad agenda to augment its short-term forecasting tools, the author constructs simple mixed-frequency forecasting equations for quarterly global output, imports, and inflation using the monthly global Purchasing Managers Index (PMI).
Content Type(s): Staff research, Staff discussion papers Topic(s): Economic models, International topics JEL Code(s): E, E3, E37, F, F4, F47

Evaluating the Effect of the Bank of Canada's Conditional Commitment Policy

Staff Discussion Paper 2010-11 Zhongfang He
The author evaluates the effect of the Bank of Canada's conditional commitment regarding the target overnight rate on longer-term market interest rates by taking into account the relationship between interest rates, inflation, and unemployment rates.
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