September 11, 2009
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2380
result(s)
September 11, 2009
Understanding Corporate Bond Spreads Using Credit Default Swaps
Corporate bond spreads worldwide have widened markedly since the beginning of the credit crisis in 2007. This article examines default and liquidity risk–the main components of the corporate bond spread–for Canadian firms that issue bonds in the U.S. market, focusing in particular on their evolution during the credit crisis. They find that, during this period, the liquidity component increased more for speculative-grade bonds than it did for investment-grade bonds, consistent with a "flight-to-quality" phenomenon. An important implication of their results for policy-makers seeking to address problems in credit markets is that the liquidity risk in corporate spreads for investment and speculative bonds behaves differently than the default risk, especially during crisis episodes.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Econometric and statistical methods,
Financial markets,
Financial stability
September 11, 2009
Agency Conflicts in the Process of Securitization
Recent evidence finds a positive association between the prevalence of loans of inferior quality and the growth in securitized products. Some attribute this development to the lack of incentives for originators to screen and monitor the performance of securitized loans; others stress that certain factors, such as balance-sheet management, also contributed to the problem, making it difficult to pin down the reason for the proliferation of such loans during the period of high securitization growth. The author reviews the conflicts of interest between participants in the securitization process that contributed to the ongoing financial turmoil and highlights the most recent policy measures and potential solutions for ameliorating these agency issues.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Financial institutions,
Financial markets
Short Changed? The Market's Reaction to the Short Sale Ban of 2008
Staff Working Paper 2009-23
Louis Gagnon,
Jonathan Witmer
Do short sales restrictions have an impact on security prices? We address this question in the context of a natural experiment surrounding the short sale ban of 2008 using a comprehensive sample of Canadian stocks cross-listed in the U.S.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Financial markets,
International topics
JEL Code(s):
F,
F3,
F30,
G,
G0,
G01,
G1,
G18,
G2,
G20
Productivity, the Terms of Trade, and the Real Exchange Rate: The Balassa-Samuelson Hypothesis Revisited
Staff Working Paper 2009-22
Ehsan U. Choudhri,
Lawrence L. Schembri
The paper examines how the Balassa-Samuelson hypothesis is affected by a modern variation of the standard model that allows product differentiation (within the traded and nontraded goods sectors) with the number of firms determined exogenously or endogenously.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Exchange rates,
Productivity
JEL Code(s):
F,
F3,
F31,
F4,
F41
A Financial Conditions Index for the United States
Staff Discussion Paper 2009-11
Kimberly Beaton,
René Lalonde,
Corinne Luu
The financial crisis of 2007–09 has highlighted the importance of developments in financial conditions for real economic activity. The authors estimate the effect of current and past shocks to financial variables on U.S. GDP growth by constructing two growthbased financial conditions indexes (FCIs) that measure the contribution to quarterly (annualized) GDP growth from financial conditions.
Content Type(s):
Staff research,
Staff discussion papers
Topic(s):
Business fluctuations and cycles,
Monetary and financial indicators,
Monetary conditions index,
Recent economic and financial developments
JEL Code(s):
E,
E3,
E32,
E4,
E44,
E47,
E5,
E51
Structural Inflation Models with Real Wage Rigidities: The Case of Canada
Staff Working Paper 2009-21
Jean-Marie Dufour,
Lynda Khalaf,
Maral Kichian
Real wage rigidities have recently been proposed as a way of building intrinsic persistence in inflation within the context of New Keynesian Phillips Curves. Using two recent illustrative structural models, we evaluate empirically the importance of real wage rigidities in the data and the extent to which such models provide useful information regarding price stickiness.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Econometric and statistical methods,
Inflation and prices,
Labour markets
JEL Code(s):
C,
C1,
C13,
C5,
C52,
E,
E3,
E31
Strengthening IMF Surveillance: An Assessment of Recent Reforms
Staff Discussion Paper 2009-10
Robert Lavigne,
Lawrence L. Schembri
The authors assess the potential impact of recently approved reforms to International Monetary Fund (IMF) surveillance; namely, the "2007 Decision on Bilateral Surveillance Over Members' Policies" and the "Statement of Surveillance Priorities" (SSP). They conclude that these complementary reforms have the potential to create a comprehensive and coherent framework for IMF surveillance. If implemented properly, […]
Content Type(s):
Staff research,
Staff discussion papers
Topic(s):
International topics
JEL Code(s):
F,
F3,
F33
The Outlook for the Global Supply of Oil: Running on Faith?
Staff Discussion Paper 2009-9
Olivier Gervais,
Ilan Kolet
The dramatic reduction in global demand, and the decline in the spot price of crude oil in the second half of last year, may have significant implications for the future supply of oil. Investments in conventional methods of extraction have been constrained, since easily accessible oil reserves are typically concentrated in countries with geopolitical uncertainty and/or state-run oil companies.
Content Type(s):
Staff research,
Staff discussion papers
Topic(s):
Business fluctuations and cycles,
Inflation and prices,
International topics
JEL Code(s):
Q,
Q4,
Q41,
Q43
The Role of Convenience and Risk in Consumers' Means of Payment
Staff Discussion Paper 2009-8
Carlos Arango,
Varya Taylor
Using data from a 2004 survey of the Canadian public, the authors study the role of convenience and risk in consumers' use of cash relative to debit and credit cards. The authors find that consumers who perceive debit cards and credit cards to be more convenient and less risky than cash use them more frequently.
Content Type(s):
Staff research,
Staff discussion papers
Topic(s):
Bank notes
JEL Code(s):
E,
E4,
E41,
L,
L2