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How much attention do firms pay to macroeconomic news? Through a novel text-based measure, two facts emerge. First, attention is polarized. Most firms either never or always pay attention to economic conditions. Second, it is countercyclical. During recessions, more firms pay attention, and firms pay greater attention to macroeconomic news.

We build a dynamic capital structure model to study the link between systematic risk exposure and debt maturity, as well as their joint impact on the term structure of credit spreads. Our model allows for time variation and lumpiness in the maturity structure. Relative to short-term debt, long-term debt is less prone to rollover risks, but its illiquidity raises the costs of financing.

This paper examines empirically the impact of financial stress on the transmission of monetary policy shocks in Canada. The model used is a threshold vector autoregression in which a regime change occurs if financial stress conditions cross a critical threshold.

We model how securities dealers respond to regulations on leverage, position and liquidity such as those imposed by the Basel III framework. We show that while asset prices exhibit greater price impact, bid-ask spreads do not change and trading volumes may even increase.

Foreign investment is often constrained by two forms of political risk: expropriation and corruption. We examine the role of government corruption in foreign direct investment (FDI) when contracts are not fully transparent and investors face the threat of expropriation.

Traditional structural models cannot distinguish whether changes in activity are a function of altered expectations today or lagged responses to past plans. Polynomial-adjustment-cost (PAC) models remove this ambiguity by explicitly separating observed dynamic behaviour into movements that have been induced by changes in expectations, and responses to expectations, that have been delayed because of adjustment costs.

This paper empirically investigates the possibility that the effects of shocks to output depend on the level of inflation. The analysis extends Elwood's (1998) framework by incorporating in the model an inflation-threshold process that can potentially influence the stochastic properties of output.

The Bank of Canada’s 2013 Methods-of-Payment Survey indicates that the share of cash in the overall number of retail transactions has continued to decrease, mainly because of increased use of contactless credit cards. The share of cash in the total value of retail transactions was virtually unchanged from 2009 to 2013. In particular, the value share of cash transactions above $50 increased. Automated banking machines (ABMs), still the major source of cash for Canadians, were used less often in 2013 than in 2009. Cash use in Canada is broadly similar to that in Australia and the United States.

The authors analyze exchange rate pass-through in an estimated structural model of a small open economy that incorporates three types of nominal rigidity (wages and the prices of domestically produced and imported goods) and eight different structural shocks. The model is estimated using quarterly data from Canada and the United States.

To investigate the extent to which the transparency of the Bank of Canada's monetary policy has improved, the authors examine empirically – over the period 30 October 2000 to 31 May 2007 – the reaction of Canadian financial markets to official Bank communications, and in particular their reaction to the recent inclusion of forward-looking policy-rate guidance in these communications.