Search

This paper finds that Government of Canada benchmark bonds tend to be more illiquid over the subsequent month when there is a large increase in government debt supply. The result is both statistically and economically significant, stronger for the long-term than the short-term sector, and is robust when other macro factors are controlled for.

A put option is a financial contract that gives the holder the right to sell an asset at a specific price by (or at) a specific date. A put option can therefore provide its holder insurance against a large drop in the stock price. This makes the prices of put options an ideal source of information for a market-based measure of the probability of a firm’s default.

This section of the Financial System Review examines the recent performance of the Canadian financial system and the factors, both domestic and international, that are influencing it.

We identify two channels that affect the relationship between inflation and unemployment. First, inflation lowers wages because unemployed suffer more from inflation than employed, generating a positive relationship. Second, inflation increases firms’ financing costs, generating a negative relationship. Improvements in firm financing conditions can induce the relationship to switch signs.

Many decentralized markets are able to attain a stable outcome despite the absence of a central authority (Roth and Vande Vate, 1990). A stable matching, however, need not be efficient if preferences are weak. This raises the question whether a decentralized market with weak preferences can attain Pareto efficiency in the absence of a central matchmaker.

Although the global financial system continues to recover gradually from the unprecedented dislocations experienced in recent years, significant downside risks remain. Market concerns over acute fiscal strains in some euro-area countries have intensified sharply in recent weeks.

FSR Highlights - December 2010

This paper studies dynamic general equilibrium models where firms trade capital in frictional markets. Gains from trade arise due to ex ante heterogeneity: some firms are better at investment, so they build capital in the primary market; others acquire it in the secondary market.

Salespeople are widely employed in many industries. We leverage a unique data set on retail sales from a leading Chinese cold-drink manufacturer and information on the firm’s salespeople assignment rule to measure the causal effect of salespeople on product revenue.

This survey took place between August 2 and August 23, 2022. Follow-up interviews took place in September. Expectations for inflation one to two years ahead have continued to rise because consumers anticipate supply chain disruptions and elevated oil prices will persist. In contrast, expectations for inflation five years ahead have eased to near pre-pandemic levels. Still, consumers are more divided this quarter about where inflation will end up in the long term.

How should policy be designed at high debt levels, when fiscal authorities have little room to adjust taxes? Assigning the monetary authority a role in achieving debt sustainability makes it less effective in stabilizing inflation and output.