Search

A small-open-economy model is developed to examine how the method of food aid disbursement affects labor employment, food security and aggregate welfare, in recipient countries, in an environment in which private sector firms pay efficiency wages to induce effort. Two forms of food aid delivery are considered: first is project food aid, under which food […]

We propose a parsimonious model of information choice in a global coordination game of regime change that is used to analyze debt crises, bank runs or currency attacks. A change in the publicly available information alters the uncertainty about the behavior of other investors.

The four essays published here provide a useful overview for anyone interested in understanding the issues and policy environment surrounding financial system stability.

The types of contracts that arise in a typical vertical manufacturer–retailer relationship are more sophisticated than usually assumed in standard macroeconomic models.

This issue of the Financial System Review reflects the Bank’s judgment that household indebtedness and housing market imbalances–the most important vulnerabilities for the Canadian financial system–have moved higher over the past six months. However, the financial system remains resilient, and macroeconomic conditions continue to improve. Other vulnerabilities discussed in this FSR are fragile fixed-income market liquidity and the capacity of an interconnected financial system to mitigate cyber threats.

This article provides an analysis of some recent banking regulatory initiatives that are likely to influence the activities of financial intermediaries and the effectiveness of central bank monetary policy implementation frameworks. Although the effects of individual regulations can be anticipated in most cases, the combined regulatory impact is not yet clear. Central banks should, however, be able to accommodate the effects of the emerging regulatory environment within their existing policy implementation frameworks.

Two aspects of the recent monetary history of Canada, Australia, and New Zealand stand out: the sensitivity of their dollars to prices of resource-based commodities, and inflation targeting. This paper explores various aspects of these phenomena.

This paper provides a novel methodology for estimating option pricing models based on risk-neutral moments. We synthesize the distribution extracted from a panel of option prices and exploit linear relationships between risk-neutral cumulants and latent factors within the continuous time affine stochastic volatility framework.

Narrow Money—Transactions Money The growth rate of the narrow monetary aggregates picked up in 1999, reflecting the expansion in economic activity and the stabilization of interest rates. The sharp acceleration of the narrow aggregates in recent months suggests buoyant growth in GDP in coming quarters. Signs of a possible rise in inflation are also emerging. Over the longer run, for inflation to remain in the Bank's 1 to 3 per cent target range, the growth of narrow money would have to slow down from its current pace. In 1999, the growth rate of M1 also began to converge with that of the other narrow aggregates, M1+ and M1++. This suggests that the influence of the special factors that have been affecting the growth rate of M1 has diminished. Broad Money—"Store of Value" Household savings represent deferred consumption, and therefore the broad monetary aggregate provides information about future spending and, hence, inflation. In 1999, the very broad measure of money, M2++, grew at much the same rate as it did in 1998. This outcome is in line with inflation remaining in the inflation-control target range over the next couple of years.

We study the causal effect of mortgage rate changes on consumer spending, debt repayment and defaults during an expansionary and a contractionary monetary policy episode in Canada. We find asymmetric responses of consumer durable spending, deleveraging and defaults. These findings help us to understand household sector response to interest rate changes.