Global Macro Risks in Currency Excess Returns Staff Working Paper 2016-32 Kimberly Berg, Nelson C. Mark We study a cross section of carry-trade-generated currency excess returns in terms of their exposure to global fundamental macroeconomic risk. Content Type(s): Staff research, Staff working papers Research Topic(s): Asset pricing, Exchange rates, Interest rates JEL Code(s): E, E2, E21, E4, E43, F, F3, F31, G, G1, G12
The Impact of Operational Events on the Network Structure of the LVTS Staff Discussion Paper 2011-7 Tom Roberts The author uses a quantitative network analysis approach to assess how participants in the Large Value Transfer System (LVTS) respond to partial outages at other banks. Content Type(s): Staff research, Staff discussion papers Research Topic(s): Payment clearing and settlement systems JEL Code(s): C, C4, C49, G, G1, G14, G2, G21
Seeking Safety Staff Working Paper 2018-41 Toni Ahnert, Enrico Perotti The scale of safe assets suggests a structural demand for a safe wealth share beyond transaction and liquidity roles. We study how investors achieve a reference wealth level by combining self-insurance and contingent liquidation of investment. Intermediaries improve upon autarky, insuring investors with poor self-insurance and limiting liquidation. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial institutions JEL Code(s): G, G2
Implementing Market-Based Indicators to Monitor Vulnerabilities of Financial Institutions Staff Analytical Note 2016-5 Cameron MacDonald, Maarten van Oordt, Robin Scott This note introduces several market-based indicators and examines how they can further inform the Bank of Canada’s vulnerability assessment of Canadian financial institutions. Market-based indicators of leverage suggest that the solvency risk for major Canadian banks has increased since the beginning of the oil-price correction in the second half of 2014. Content Type(s): Staff research, Staff analytical notes Research Topic(s): Financial institutions, Financial stability JEL Code(s): G, G1, G10, G2, G21
Narrative-Driven Fluctuations in Sentiment: Evidence Linking Traditional and Social Media Staff Working Paper 2023-23 Alistair Macaulay, Wenting Song News media present competing interpretations of what breaking news implies for the macroeconomy. Recent examples include news reporting on high inflation and yield curve inversions. Do these narratives shape macroeconomic sentiment? In this paper, we highlight the importance of narratives using evidence linking traditional media and social media. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial markets, Inflation and prices, Monetary policy JEL Code(s): D, D8, D84, E, E3, E32, E4, E43, E44, E5, G, G1
Cyber Risk and Security Investment Staff Working Paper 2022-32 Toni Ahnert, Michael Brolley, David Cimon, Ryan Riordan We develop a principal-agent model of cyber-attacking with fee-paying clients who delegate security decisions to financial platforms. We derive testable implications about clients’ vulnerability to cyber attacks and about the fees charged. Content Type(s): Staff research, Staff working papers Research Topic(s): Economic models, Financial services, Financial stability, Financial system regulation and policies, Payment clearing and settlement systems JEL Code(s): D, D7, D78, D8, D81, G, G1, G18, G2, G21, G23
Why Do Central Banks Make Public Announcements of Open Market Operations? Staff Working Paper 2020-35 Narayan Bulusu Central banks communicate the results of open market operations. This helps participants in financial markets more accurately estimate the prevailing demand and supply conditions in the market for overnight loans. Content Type(s): Staff research, Staff working papers Research Topic(s): Central bank research, Monetary policy implementation JEL Code(s): D, D5, D52, E, E5, E58, G, G2, G21
What COVID-19 revealed about the resilience of bond funds Staff Analytical Note 2020-18 Guillaume Ouellet Leblanc, Ryan Shotlander The liquidity management strategies of fund managers, supported by policy measures, have helped bond funds limit the increase in redemptions caused by COVID 19. This avoided further deterioration in liquidity in bond markets. Nevertheless, these funds were left with lower cash buffers, which could make them more vulnerable to additional large redemptions. Content Type(s): Staff research, Staff analytical notes Research Topic(s): Financial markets, Financial stability JEL Code(s): G, G1, G2, G20, G23
November 19, 2019 Researching the Economic Impacts of Climate Change Miguel Molico The Bank of Canada has a mandate to “promote the economic and financial welfare of Canada,” primarily through the conduct of monetary policy and promotion of a safe, sound and efficient financial system. Understanding the macroeconomic and financial system impacts of climate change and the transition to a low-carbon economy is therefore a priority for the Bank. Content Type(s): Staff research, Other Research Topic(s): Climate change
Volatility and Liquidity Costs Staff Working Paper 2013-29 Selma Chaker Observed high-frequency prices are contaminated with liquidity costs or market microstructure noise. Using such data, we derive a new asset return variance estimator inspired by the market microstructure literature to explicitly model the noise and remove it from observed returns before estimating their variance. Content Type(s): Staff research, Staff working papers Research Topic(s): Econometric and statistical methods, Financial markets, Market structure and pricing JEL Code(s): C, C1, C14, C5, C51, C58, G, G2, G20