Characterizing the Canadian Financial Cycle with Frequency Filtering Approaches Staff Analytical Note 2018-34 Andrew Lee-Poy In this note, I use two multivariate frequency filtering approaches to characterize the Canadian financial cycle by capturing fluctuations in the underlying variables with respect to a long-term trend. The first approach is a dynamically weighted composite, and the second is a stochastic cycle model. Content Type(s): Staff research, Staff analytical notes Research Topic(s): Business fluctuations and cycles, Econometric and statistical methods, Financial stability, Monetary and financial indicators, Recent economic and financial developments JEL Code(s): C, C0, C01, C1, C13, C14, C18, C3, C32, C5, C51, C52, E, E3, E32, E6, E66, G, G0, G01, G1, G18
Does Unconventional Monetary and Fiscal Policy Contribute to the COVID Inflation Surge in the US? Staff Working Paper 2024-38 Jing Cynthia Wu, Yinxi Xie, Ji Zhang We assess whether unconventional monetary and fiscal policy implemented in response to the COVID-19 pandemic in the U.S. contribute to the 2021-2023 inflation surge through the lens of several different empirical methodologies and establish a null result. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Central bank research, Fiscal policy, Inflation and prices, Monetary policy JEL Code(s): E, E3, E31, E5, E52, E6, E63
Good Volatility, Bad Volatility and Option Pricing Staff Working Paper 2017-52 Bruno Feunou, Cédric Okou Advances in variance analysis permit the splitting of the total quadratic variation of a jump diffusion process into upside and downside components. Recent studies establish that this decomposition enhances volatility predictions, and highlight the upside/downside variance spread as a driver of the asymmetry in stock price distributions. Content Type(s): Staff research, Staff working papers Research Topic(s): Asset pricing, Econometric and statistical methods JEL Code(s): G, G1, G12
A Counterfactual Valuation of the Stock Index as a Predictor of Crashes Staff Working Paper 2017-38 Tom Roberts Stock market fundamentals would not seem to meaningfully predict returns over a shorter-term horizon—instead, I shift focus to severe downside risk (i.e., crashes). Content Type(s): Staff research, Staff working papers Research Topic(s): Asset pricing, Financial stability JEL Code(s): G, G0, G01, G1, G12, G17, G19
Modelling Financial Instability: A Survey of the Literature Staff Working Paper 2002-12 Alexandra Lai The magnitude and frequency of recent financial crises underscore the importance of understanding financial instability for the purpose of crisis prevention and crisis management. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial institutions, Financial markets, Financial services JEL Code(s): G, G2, G20, G21, G28
Collateral and Credit Supply Staff Working Paper 2003-11 Joseph Atta-Mensah The author examines the role of collateral in an environment where lenders and borrowers possess identical information and similar beliefs about its future value. Using option-pricing techniques, he shows that a secured loan contract is equivalent to a regular bond and an embedded option to the borrower to default. Content Type(s): Staff research, Staff working papers Research Topic(s): Credit and credit aggregates, Economic models JEL Code(s): E, E5, E51, G, G1, G11, G12, G13
December 13, 2021 Monetary Policy Framework Renewal (December 2021) Commentary and technical data relating to the 2021 renewal. Content Type(s): Background materials Research Topic(s): Inflation and prices, Monetary policy
The Welfare Implications of Inflation versus Price-Level Targeting in a Two-Sector, Small Open Economy Staff Working Paper 2006-12 Eva Ortega, Nooman Rebei The authors analyze the welfare implications of simple monetary policy rules in the context of an estimated model of a small open economy for Canada with traded and non-traded goods, and with sticky prices and wages. Content Type(s): Staff research, Staff working papers Research Topic(s): Economic models, Exchange rates, Inflation targets JEL Code(s): E, E3, E31, E32, E5, E52
Can Affine Term Structure Models Help Us Predict Exchange Rates? Staff Working Paper 2006-27 Antonio Diez de los Rios The author proposes an arbitrage-free model of the joint behaviour of interest and exchange rates whose exchange rate forecasts outperform those produced by a random-walk model, a vector autoregression on the forward premiums and the rate of depreciation, and the standard forward premium regression. Content Type(s): Staff research, Staff working papers Research Topic(s): Econometric and statistical methods, Exchange rates, Interest rates JEL Code(s): E, E4, E43, F, F3, F31, G, G1, G12, G15
Information Flows and Aggregate Persistence Staff Working Paper 2009-11 Oleksiy Kryvtsov Models with imperfect information that generate persistent monetary nonneutrality predominantly rely on assumptions leading to substantial heterogeneity of information across price-setters. This paper develops a quantitative general equilibrium model in which the degree of heterogeneity of information is determined endogenously. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Inflation and prices, Monetary policy transmission JEL Code(s): D, D8, D83, E, E3, E31, E32