Price Level Targeting in a Small Open Economy with Financial Frictions: Welfare Analysis Staff Working Paper 2008-40 Ali Dib, Caterina Mendicino, Yahong Zhang How important are the benefits of low price-level uncertainty? This paper explores the desirability of price-level path targeting in an estimated DSGE model fit to Canadian data. The policy implications are based on social welfare evaluations. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial stability, Inflation and prices, Monetary policy framework JEL Code(s): E, E3, E31, E32, E5, E52
Order Flow Segmentation, Liquidity and Price Discovery: The Role of Latency Delays Staff Working Paper 2018-16 Michael Brolley, David Cimon Latency delays—known as “speed bumps”—are an intentional slowing of order flow by exchanges. Supporters contend that delays protect market makers from high-frequency arbitrage, while opponents warn that delays promote “quote fading” by market makers. We construct a model of informed trading in a fragmented market, where one market operates a conventional order book and the other imposes a latency delay on market orders. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial markets, Financial system regulation and policies, Market structure and pricing JEL Code(s): G, G1, G14, G18
The Common Component of CPI: An Alternative Measure of Underlying Inflation for Canada Staff Working Paper 2013-35 Mikael Khan, Louis Morel, Patrick Sabourin In this paper, the authors propose a measure of underlying inflation for Canada obtained from estimating a monthly factor model on individual components of the CPI. This measure, labelled the common component of CPI, has intuitive appeal and a number of interesting features. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Econometric and statistical methods, Inflation and prices, Monetary policy framework JEL Code(s): C, C1, E, E3, E31, E32, E5, E52, E58
Non-linéarité de la courbe de Phillips : un survol de la littérature Staff Analytical Note 2018-3 Renaud St-Cyr The paper reviews evidence from the economic literature on the nature of the relationship between excess capacity and inflation, better known as the Phillips curve. In particular, we examine the linearity of this relationship. This is an important issue in the current economic context in which advanced economies are approaching or exceed their potential output. Content Type(s): Staff research, Staff analytical notes Research Topic(s): Inflation and prices, International topics JEL Code(s): E, E3, E31, E32
The Microstructure of Multiple-Dealer Equity and Government Securities Markets: How They Differ Staff Working Paper 2002-9 Toni Gravelle Although dealership government and equity securities have, on the surface, similar market structures, the author demonstrates that some subtle differences exist between them that are likely to significantly affect the way market-makers trade, and as such have an impact on the liquidity that they provide. Content Type(s): Staff research, Staff working papers Research Topic(s): Debt management, Financial markets, Market structure and pricing JEL Code(s): G, G1, G10, G15, G18
Revisiting the Monetary Sovereignty Rationale for CBDCs Staff Discussion Paper 2021-17 Skylar Brooks One argument for central bank digital currencies (CBDCs) is that without them, private and foreign digital monies could displace domestic currencies, threatening the central bank’s monetary policy and lender of last resort capabilities. I revisit this monetary sovereignty rationale and offer a wider view—one that considers a broader set of currency functions and captures important cross-country variation. Content Type(s): Staff research, Staff discussion papers Research Topic(s): Debt management, Digital currencies and fintech, Exchange rate regimes, Financial stability, Monetary policy JEL Code(s): E, E4, E41, E42, E5, E52, E58, H, H1, H12, H6, H63
Supply Shocks and Real Exchange Rate Dynamics: Canadian Evidence Staff Working Paper 2002-31 Céline Gauthier, David Tessier In this paper, we study the impact of supply shocks on the Canadian real exchange rate. We specify a structural vector-error-correction model that links the real exchange rate to different fundamentals. Content Type(s): Staff research, Staff working papers Research Topic(s): Exchange rates JEL Code(s): C, C3, C32, F, F3, F31
November 16, 2016 Follow the Money: A Canadian Perspective on Financial Globalization Remarks Timothy Lane Centre for International Governance Innovation (CIGI) Waterloo, Ontario Deputy Governor Timothy Lane discusses the benefits and challenges of international capital mobility. Content Type(s): Press, Speeches and appearances, Remarks Research Topic(s): Balance of payments and components, Exchange rates, Financial markets, International financial markets, Market structure and pricing, Trade integration
Sovereign Default and State-Contingent Debt Staff Discussion Paper 2013-3 Martin Brooke, Rhys R. Mendes, Alex Pienkowski, Eric Santor The Latin American debt crises in the 1980s and the Asian crisis in the late 1990s both provided impetus for reforming the framework for restructuring sovereign debt. In the late 1980s, the Brady plan established the importance of substantive debt relief in addressing some crises. Content Type(s): Staff research, Staff discussion papers Research Topic(s): International financial markets, International topics JEL Code(s): F, F3, F34
The Bank of Canada's New Quarterly Projection Model, Part 4. A Semi-Structural Method to Estimate Potential Output: Combining Economic Theory with a Time-Series Filter Technical Report No. 77 Leo Butler The level of potential output plays a central role in the Bank of Canada's new Quarterly Projection Model (QPM). This report, the fourth in a series documenting QPM, describes a general method to measure potential output, as well as its implementation in the QPM system. Content Type(s): Staff research, Technical reports Research Topic(s): Economic models JEL Code(s): C, C5, C51, E, E2, E23