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2160 Results

Assessing the Predictive Ability of Sovereign Default Risk on Exchange Rate Returns

Staff working paper 2017-19 Claudia Foroni, Francesco Ravazzolo, Barbara Sadaba
Increased sovereign credit risk is often associated with sharp currency movements. Therefore, expectations of the probability of a sovereign default event can convey important information regarding future movements of exchange rates.
May 13, 2014

Measuring Uncertainty in Monetary Policy Using Realized and Implied Volatility

Uncertainty surrounding the Bank of Canada’s future policy rates is measured using implied volatility computed from interest rate options and realized volatility computed from intraday prices of interest rate futures. Both volatility measures show that uncertainty decreased following major policy actions taken by the Bank in response to the 2007–09 financial crisis. Findings also indicate that, on average, uncertainty decreases following the Bank’s policy rate announcements.
Content Type(s): Publications, Bank of Canada Review articles JEL Code(s): E, E5, E52, E58

ToTEM III: The Bank of Canada’s Main DSGE Model for Projection and Policy Analysis

ToTEM III is the most recent generation of the Bank of Canada’s main dynamic stochastic general equilibrium model for projection and policy analysis. The model helps Bank staff tell clear and coherent stories about the Canadian economy’s current state and future evolution.

Downward Nominal Wage Rigidity Meets the Zero Lower Bound

Staff working paper 2017-16 Robert Amano, Stefano Gnocchi
We add downward nominal wage rigidity to a standard New Keynesian model with sticky prices and wages, where the zero lower bound on nominal interest rates is allowed to bind. We find that wage rigidity not only reduces the frequency of zero bound episodes but also mitigates the severity of corresponding recessions.

Evolving Temperature Dynamics in Canada: Preliminary Evidence Based on 60 Years of Data

Are summers getting hotter? Do daily temperatures change more than they used to? Using daily Canadian temperature data from 1960 to 2020 and modern econometric methods, we provide economists and policy-makers evidence on the important climate change issue of evolving temperatures.

Is This Normal? The Cost of Assuming that Derivatives Have Normal Returns

Staff working paper 2024-46 Radoslav Raykov
Derivatives exchanges often determine collateral requirements, which are fundamental to market safety, with dated risk models assuming normal returns. However, derivatives returns are heavy-tailed, which leads to the systematic under-collection of collateral (margin). This paper uses extreme value theory (EVT) to evaluate the cost of this margin inadequacy to market participants in the event of default.

Maturity Composition and the Demand for Government Debt

Staff working paper 2020-29 Jason Allen, Jakub Kastl, Milena Wittwer
The main objectives of debt management are to raise stable and low-cost funding to meet the government’s financial needs and to maintain a well-functioning market for government securities.

What People Believe About Monetary Finance and What We Can(’t) Do About It: Evidence from a Large-Scale, Multi-Country Survey Experiment

Staff working paper 2023-36 Cars Hommes, Julien Pinter, Isabelle Salle
We conduct a large-scale survey to shed light on what people believe about public finance. An experiment demonstrates that central bank communication can persistently shift views on monetary financing. It further suggests that views on monetary financing impact support for fiscal discipline.
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