June 7, 2018 Financial System Review - June 2018 This issue of the Financial System Review reflects the Bank’s judgment that high household indebtedness and housing market imbalances remain the most important vulnerabilities. While these vulnerabilities remain elevated, policy measures continue to improve the resilience of the financial system. A third vulnerability highlighted in the FSR concerns cyber threats to an interconnected financial system. Content Type(s): Publications, Financial Stability Report
Inflation, Learning and Monetary Policy Regimes in The G-7 Economies Staff Working Paper 1995-6 Nicholas Ricketts, David Rose In this paper, the authors report estimates of two- and three-state Markov switching models applied to inflation, measured using consumer price indexes, in the G-7 countries. They report tests that show that two-state models are preferred to simple one-state representations of the data, and argue that three-state representations are more satisfactory than two-state representations for […] Content Type(s): Staff research, Staff working papers Research Topic(s): Inflation and prices
A Note on Central Counterparties in Repo Markets Staff Discussion Paper 2012-4 Hajime Tomura The author introduces a central counterparty (CCP) into a model of a repo market. Without the CCP, there exist multiple equilibria in the model. In one of the equilibria, a repo market emerges as bond dealers and cash investors choose to arrange repos in an over-the-counter bond market. Content Type(s): Staff research, Staff discussion papers Research Topic(s): Financial markets, Financial stability, Payment clearing and settlement systems JEL Code(s): G, G2, G24
Productive Misallocation and International Transmission of Credit Shocks Staff Working Paper 2015-19 Yuko Imura, Julia Thomas We develop an asymmetric, two-country equilibrium business cycle model to study the role of international trade in transmitting and propagating the real effects of global financial shocks. Our model predicts that a recession in a large economy considerably alters a recession in its smaller trade partner, with distinct investment dynamics driving the transmission. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Economic models, Financial markets, Financial stability, International topics JEL Code(s): E, E2, E22, E3, E32, E4, E44, F, F4, F41, F44
The Consumer Value Proposition for a Hypothetical Digital Canadian Dollar Staff Discussion Paper 2024-16 Martine Warren, Bill Laur, Ted Garanzotis, Sebastian Hernandez We explore the consumer value proposition of a hypothetical Digital Canadian Dollar, adoption considerations and the users who would benefit most from this potential new payment method. We employ a design-thinking consultation methodology, allowing participants to interact with research prototypes of increasing complexity to reveal user preferences, constraints and adoption influences. Content Type(s): Staff research, Staff discussion papers Research Topic(s): Accessibility, Bank notes, Central bank research, Digital currencies and fintech JEL Code(s): C, C9, D, D1, D12, E, E4, E42, E5, E58, O, O3, O33
Regime Switches in the Risk-Return Trade-Off Staff Working Paper 2013-51 Eric Ghysels, Pierre Guérin, Massimiliano Marcellino This paper deals with the estimation of the risk-return trade-off. We use a MIDAS model for the conditional variance and allow for possible switches in the risk-return relation through a Markov-switching specification. Content Type(s): Staff research, Staff working papers Research Topic(s): Econometric and statistical methods, Financial markets JEL Code(s): G, G1, G10, G12
Tractable Term Structure Models Staff Working Paper 2015-46 Bruno Feunou, Jean-Sébastien Fontaine, Anh Le, Christian Lundblad We introduce a new framework that facilitates term structure modeling with both positive interest rates and flexible time-series dynamics but that is also tractable, meaning amenable to quick and robust estimation. Content Type(s): Staff research, Staff working papers Research Topic(s): Asset pricing, Interest rates, International financial markets, International topics, Monetary policy and uncertainty, Monetary policy transmission JEL Code(s): G, G1, G12
Assessing global potential output growth and the US neutral rate: April 2021 Staff Analytical Note 2021-5 Thomas J. Carter, Xin Scott Chen, Ali Jaffery, Christopher Hajzler, Jonathan Lachaine, Peter Shannon, Subrata Sarker, Graeme Westwood, Beiling Yan We expect global potential output growth to rise to 3 percent by 2022. Relative to the last assessment in October 2020, potential output growth has been revised up across all the regions. The range of the US neutral rate remains unchanged relative to the autumn 2020 assessment. Content Type(s): Staff research, Staff analytical notes Research Topic(s): Interest rates, Monetary policy, Potential output, Productivity JEL Code(s): E, E1, E2, E4, E5, F, F0, O, O4
Technological Progress and Monetary Policy: Managing the Fourth Industrial Revolution Staff Discussion Paper 2019-11 Stephen S. Poloz This paper looks at the implications for monetary policy of the widespread adoption of artificial intelligence and machine learning, which is sometimes called the “fourth industrial revolution.” Content Type(s): Staff research, Staff discussion papers Research Topic(s): Economic models, Financial stability, Monetary policy and uncertainty, Monetary policy framework JEL Code(s): C, C5, E, E3, O, O1, O11, O3, O33
Are Bank Bailouts Welfare Improving? Staff Working Paper 2021-56 Malik Shukayev, Alexander Ueberfeldt Financial sector bailouts, while potentially beneficial during a crisis, might lead to excessive risk taking if anticipated. Taking expectations and aggregate risk implications into account, we show that bailouts can be welfare improving, but only if capital adequacy constraints are sufficiently tight. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial institutions, Financial stability, Financial system regulation and policies JEL Code(s): D, D6, D62, E, E3, E32, E4, E44, G, G0, G01