Pricing Interest Rate Derivatives in a Non-Parametric Two-Factor Term-Structure Model Staff Working Paper 1999-19 John Knight, Fuchun Li, Mingwei Yuan Diffusion functions in term-structure models are measures of uncertainty about future price movements and are directly related to the risk associated with holding financial securities. Correct specification of diffusion functions is crucial in pricing options and other derivative securities. In contrast to the standard parametric two-factor models, we propose a non-parametric two-factor term-structure model that […] Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Market structure and pricing JEL Code(s): C, C1, C14, C2, C22, G, G1, G13
Are Currency Crises Low-State Equilibria? An Empirical, Three-Interest-Rate Model Staff Working Paper 2006-5 Christopher Cornell, Raphael Solomon Suppose that the dynamics of the macroeconomy were given by (partly) random fluctuations between two equilibria: "good" and "bad." Content Type(s): Staff research, Staff working papers Topic(s): Monetary policy and uncertainty JEL Code(s): C, C6, C62, E, E5, E59, F, F4, F41
McCallum Rules, Exchange Rates, and the Term Structure of Interest Rates Staff Working Paper 2008-43 Antonio Diez de los Rios McCallum (1994a) proposes a monetary rule where policymakers have some tendency to resist rapid changes in exchange rates to explain the forward premium puzzle. Content Type(s): Staff research, Staff working papers Topic(s): Exchange rates, Interest rates, Monetary policy transmission JEL Code(s): E, E4, E43, F, F3, F31, G, G1, G12, G15
Home Equity Extraction and the Boom-Bust Cycle in Consumption and Residential Investment Staff Working Paper 2018-6 Xiaoqing Zhou The consumption boom-bust cycle in the 2000s coincided with large fluctuations in the volume of home equity borrowing. Contrary to conventional wisdom, I show that homeowners largely borrowed for residential investment and not consumption. Content Type(s): Staff research, Staff working papers Topic(s): Credit and credit aggregates, Economic models, Housing JEL Code(s): D, D1, E, E2, E3
Adopting Price-Level Targeting under Imperfect Credibility in ToTEM Staff Working Paper 2009-17 Gino Cateau, Oleksiy Kryvtsov, Malik Shukayev, Alexander Ueberfeldt Using the Bank of Canada's main projection and policy-analysis model, ToTEM, this paper measures the welfare gains of switching from inflation targeting to price-level targeting under imperfect credibility. Following the policy change, private agents assign a probability to the event that the policy-maker will revert to inflation-targeting next period. Content Type(s): Staff research, Staff working papers Topic(s): Monetary policy framework, Monetary policy implementation JEL Code(s): E, E3, E31, E5, E52
Habit Formation and the Persistence of Monetary Shocks Staff Working Paper 2002-27 Hafedh Bouakez, Emanuela Cardia, Francisco Ruge-Murcia This paper studies the persistent effects of monetary shocks on output. Previous empirical literature documents this persistence, but standard general-equilibrium models with sticky prices fail to generate output responses beyond the duration of nominal contracts. Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Monetary policy transmission JEL Code(s): E, E3, E4, E5
The Effect of Adjustment Costs and Organizational Change on Productivity in Canada: Evidence from Aggregate Data Staff Working Paper 2004-1 Danny Leung A basic neoclassical model of production is often used to assess the contribution of investment to output growth. In the model, investment raises the capital stock and output growth increases in proportion to the growth in capital. Content Type(s): Staff research, Staff working papers Topic(s): Productivity JEL Code(s): O, O3, O31, O4, O49
Trend Inflation, Wage and Price Rigidities, and Welfare Staff Working Paper 2007-42 Robert Amano, Kevin Moran, Stephen Murchison, Andrew Rennison This paper studies the steady-state costs of inflation in a general-equilibrium model with real per capita output growth and staggered nominal price and wage contracts. Content Type(s): Staff research, Staff working papers Topic(s): Inflation: costs and benefits JEL Code(s): E, E0, E5
Multivariate Realized Stock Market Volatility Staff Working Paper 2007-20 Gregory Bauer, Keith Vorkink We present a new matrix-logarithm model of the realized covariance matrix of stock returns. The model uses latent factors which are functions of both lagged volatility and returns. Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Financial markets JEL Code(s): C, C3, C32, C5, C53, G, G1, G14
What Accounts for the U.S.-Canada Education-Premium Difference? Staff Working Paper 2009-4 Oleksiy Kryvtsov, Alexander Ueberfeldt This paper analyzes the differences in wage ratios of university graduates to less than university graduates, the education premium, in Canada and the United States from 1980 to 2000. Both countries experienced a similar increase in the fraction of university graduates and a similar increase in skill biased technological change based on capital-embodied technological progress, but only the United States had a large increase in the education premium. Content Type(s): Staff research, Staff working papers Topic(s): Labour markets, Productivity JEL Code(s): E, E2, E24, E25, J, J2, J24, J3, J31