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2182 Results

Estimating Systematic Risk Under Extremely Adverse Market Conditions

Staff working paper 2016-22 Maarten van Oordt, Chen Zhou
This paper considers the problem of estimating a linear model between two heavy-tailed variables if the explanatory variable has an extremely low (or high) value. We propose an estimator for the model coefficient by exploiting the tail dependence between the two variables and prove its asymptotic properties.

The Role of International Financial Integration in Monetary Policy Transmission

Staff working paper 2024-3 Jing Cynthia Wu, Yinxi Xie, Ji Zhang
We propose an open-economy New Keynesian model with financial integration that allows financial intermediaries to hold foreign long-term bonds. We study the implications of financial integration on monetary policy transmission. Among various aspects of financial integration, the bond duration plays a major role. These results hold for conventional and unconventional monetary policies.

Assessing global potential output growth: April 2026

We present the annual update of the Bank of Canada staff estimates for global potential output growth. These estimates served as key inputs to the analysis supporting the April 2026 Monetary Policy Report.

Are Temporary Oil Supply Shocks Real?

Staff working paper 2022-52 Johan Brannlund, Geoffrey R. Dunbar, Reinhard Ellwanger
Hurricanes disrupt oil production in the Gulf of Mexico because producers shut in oil platforms to safeguard lives and prevent damage. We examine the effects of these temporary oil supply shocks on real economic activity in the United States.
August 23, 2003

Financial Developments in Canada: Past Trends and Future Challenges

Freedman and Engert focus on the changing pattern of lending and borrowing in Canada in the past thirty to forty years, including the types of financial instruments used and the relative roles of financial institutions and financial markets. They examine how borrowing mechanisms have changed over time and consider the challenges facing the Canadian financial sector, including whether our financial markets are in danger of disappearing because of the size and pre-eminence of U.S. financial markets. Some of the trends examined here include syndicated lending, securitization, and credit derivatives, a form of financial engineering that has become increasingly important in the last few years. They also study bond and equity markets to determine whether Canadian capital markets have been hollowed out or abandoned by Canadian firms and conclude that the data do not provide much support for that view.

The Optimum Quantity of Central Bank Reserves

Staff working paper 2025-15 Jonathan Witmer
This paper analyzes the optimal quantity of central bank reserves in an economy where reserves and other financial assets provide liquidity benefits. Using a static model, I derive a constrained Friedman rule that characterizes the socially optimal level of reserves, demonstrating that this quantity is neither necessarily large nor small but depends on the marginal benefits of reserves relative to alternative safe assets.

The Impact of a Trade War: Assessment of the Current Tariffs and Alternative Scenarios

Staff analytical note 2019-20 Karyne B. Charbonneau
This note uses Charbonneau and Landry’s (2018) framework to assess the direct impact of the current trade tensions on the Canadian and global economies, as well as possible implications if the conflict escalates further. Overall, my findings show that the estimated impact of current tariffs on real gross domestic product (GDP) remains relatively small, which is in line with the literature on gains from trade, but the impact on trade is much larger.
June 11, 2015

Assessing Vulnerabilities in the Canadian Financial System

The authors present the four common cyclical vulnerabilities that appear in financial systems, providing examples of qualitative and quantitative indicators used to monitor these vulnerabilities across different sectors. They also discuss other inputs to the vulnerability assessment and to the internal process used at the Bank of Canada for identifying, evaluating and communicating vulnerabilities and risks, and highlight some of the key challenges in assessing financial system vulnerabilities and risks.
Content Type(s): Publications, Financial System Review articles JEL Code(s): G, G0, G01, G1, G10, G2, G20
November 17, 2011

Liquidity Provision and Collateral Haircuts in Payments Systems

Central banks play a pivotal role in well-functioning payments systems by providing liquidity via collateralized lending. This article discusses the role of collateral and haircut policy in central bank lending, as well as the distinguishing features of the central bank’s policy relative to private sector practices. It presents a model that explicitly incorporates the unique role of central banks in the payments system and argues that central banks must consider how their haircut policies affect the relative price and liquidity of assets, the market’s asset allocation, and the likelihood of participants to default. Furthermore, under extraordinary circumstances, there is a rationale for the central bank to temporarily reduce haircuts or broaden the list of eligible collateral to mitigate the shortage of liquidity in the market.

Reconciling Jaimovich-Rebelo Preferences, Habit in Consumption and Labor Supply

Staff working paper 2018-26 Tom D. Holden, Paul Levine, Jonathan Swarbrick
This note studies a form of a utility function of consumption with habit and leisure that (a) is compatible with long-run balanced growth, (b) hits a steady-state observed target for hours worked and (c) is consistent with micro-econometric evidence for the inter-temporal elasticity of substitution and the Frisch elasticity of labor supply.
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