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This paper reconsiders several recently published but controversial results about the behaviour of exchange rates. In particular, it explores finite-sample problems in the application of cointegration tests and shows how these may have affected the conclusions of recent research.

In light of the U.S. current account deficit, pressure is high on Asian countries to revalue their currencies. The calls from some U.S. policymakers for tariffs on imports from China has sparked fears that this could trigger a world-wide surge in protectionism.

The literature on market timing of long-term debt issuance yields mixed evidence that managers can successfully time their debt-maturity issuance. The early results that are indicative of debt-maturity timing are not robust to accounting for structural breaks or to other measures of debt maturity from firm-level data that account for call and put provisions in […]

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The "pretended" Bank of Upper Canada — Kingston (1819-22)

The note is part of the National Currency Collection of the Bank of Canada.
Photography by Gord Carter

We consider structural vector autoregressions that are identified through stochastic volatility. Our analysis focuses on whether a particular structural shock can be identified through heteroskedasticity without imposing any sign or exclusion restrictions.

Growth in the Canadian economy is projected to reach 2.8 per cent this year before slowing to 2.0 per cent next year and 1.6 per cent in 2019.

There appears to be a disconnect between the importance of the zero bound on nominal interest rates in the real-world and predictions from quantitative DSGE models. Recent economic events have reinforced the relevance of the zero bound for monetary policy whereas quantitative models suggest that the zero bound does not constrain (optimal) monetary policy.

We construct a multi-country affine term structure model that contains unspanned macroeconomic and foreign exchange risks. The canonical version of the model is derived and is shown to be easy to estimate.

The authors conduct a counterfactual simulation of the proposed rules under the new Basel Capital Accord (Basel II), including the revised treatment of expected and unexpected credit losses proposed by the Basel Committee in October 2003.

This paper shows that real effective exchange rate (REER) regressions, the standard approach for estimating the response of aggregate exports to exchange rate changes, imply biased estimates of the underlying elasticities. We provide a new aggregate regression specification that is consistent with bilateral trade flows micro-founded by the gravity equation.