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We introduce generalized autoregressive gamma (GARG) processes, a class of autoregressive and moving-average processes in which each conditional moment dynamic is driven by a different and identifiable moving average of the variable of interest. We show that using GARG processes reduces pricing errors by substantially more than using existing autoregressive gamma processes does.

Underlying wage growth has fallen short of what would be consistent with an economy operating with little or no slack. While many factors could explain this weakness, the availability of additional labour resources from informal (“gig”) work—not fully captured in standard measures of employment and hours worked—may play a role.

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.

We study constrained-efficient bank capital regulation in a model with market-imposed equity requirements. Banks hold equity buffers to insure against sudden loss of access to funding. However, in the model, banks choose to only partially self-insure because equity is privately costly.

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.

Cashless or tellerless bank branches have proliferated in several countries in recent years. In a cashless bank branch, teller or counter services such as cash withdrawals, deposits and cheque-cashing are not available.

Since last summer, many of us here today have been preoccupied with the ongoing dislocations in financial markets. What began in securities linked to U.S. subprime mortgages has spread to a broad range of structured assets, conventional credit markets, and, to a lesser extent, equities.

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.

Do banks realize simultaneous trading losses because they invest in the same assets, or because different assets are subject to the same macro shocks? This paper decomposes the comovements of bank trading losses into two orthogonal channels: portfolio overlap and common shocks.

With your professional interests in foreign exchange, money markets, capital markets, and derivatives, I'm sure the past year and a half has been exciting and interesting – if those are the right words. We've been living through a period of astonishing financial turbulence, historic marketplace losses, and serious threats to financial stability.