Staff working papers

This paper presents a model of an over-the-counter bond market in which bond dealers and cash investors arrange repurchase agreements (repos) endogenously.

We examine the relative ability of simple inflation targeting (IT) and price level targeting (PLT) monetary policy rules to minimize both inflation variability and business cycle fluctuations in Canada for shocks that have important consequences for global commodity prices.

This paper applies a static model of an interest rate corridor to the Canadian data, and estimates the aggregate demand for central-bank settlement balances in the Large Value Transfer System (LVTS).

Many predict that innovations in retail payment may render cash obsolete. We investigate this possibility in the context of recent payment innovations such as contactless-credit and stored-value cards.

We examine the evolution of the effects of monetary policy shocks on the distribution of disaggregate prices and quantities of personal consumption expenditures to assess the contribution of monetary policy to changes in U.S. inflation dynamics.

We investigate whether expectations that are not fully rational have the potential to explain the evolution of house prices and the price-to-rent ratio in the United States.

Expected returns vary when investors face time-varying investment opportunities. Long-run risk models (Bansal and Yaron 2004) and no-arbitrage affine models (Duffie, Pan, and Singleton 2000) emphasize sources of risk that are not observable to the econometrician.

In an investigation of banks’ loan pricing policies in the United States over the past two decades, this study finds supporting evidence for the bank risk-taking channel of monetary policy. We show that banks charge lower spreads when they lend to riskier borrowers relative to the spreads they charge on loans to safer borrowers in periods of low short-term rates compared to periods of high short-term rates.

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.

Demand for industrial raw materials from emerging economies, particularly emerging Asia, is widely believed to have fueled the surge in oil and industrial commodity prices during 2002-2008. The paper first presents a simple storage model in which commodity prices respond to market participant’s changing expectations of the future macroeconomic environment.