Optimal Currency Areas: A Review of the Recent Literature Staff Working Paper 1999-16 Robert Lafrance, Pierre St-Amant This paper surveys the recent literature on optimal currency areas (OCAs). Topics that are covered include theoretical developments in the context of general-equilibrium models and empirical work on shocks asymmetry and adjustment mechanisms. Issues relating to the endogeneity of OCA criteria, the role of exchange rate flexibility in promoting greater macroeconomic stability, and the links […] Content Type(s): Staff research, Staff working papers Topic(s): Exchange rate regimes JEL Code(s): E, E4, E42, F, F3, F33
Forecasting Inflation and the Inflation Risk Premiums Using Nominal Yields Staff Working Paper 2012-37 Bruno Feunou, Jean-Sébastien Fontaine We provide a decomposition of nominal yields into real yields, expectations of future inflation and inflation risk premiums when real bonds or inflation swaps are unavailable or unreliable due to their relative illiquidity. Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Econometric and statistical methods, Inflation and prices, Interest rates JEL Code(s): E, E4, E43, E47, G, G1, G12
Exchange Rates and Individual Good’s Price Misalignment: Some Preliminary Evidence of Long-Horizon Predictability Staff Discussion Paper 2011-8 Wei Dong, Deokwoo Nam When prices are sticky, movements in the nominal exchange rate have a direct impact on international relative prices. A relative price misalignment would trigger an adjustment in consumption and employment, and may help to predict future movements in the exchange rate. Content Type(s): Staff research, Staff discussion papers Topic(s): Exchange rates, International topics JEL Code(s): F, F3, F31, F4, F47
Windfall Income Shocks with Finite Planning Horizons Staff Working Paper 2022-40 Michael Boutros How do households respond when they receive unanticipated income, such as an inheritance or government stimulus cheque? This paper studies these windfall income shocks through a model of household behaviour that generates a realistic consumption response for households along the entire distribution of wealth. Content Type(s): Staff research, Staff working papers Topic(s): Domestic demand and components, Economic models, Fiscal policy JEL Code(s): D, D9, D91, E, E2, E21, G, G5, G51
What do high-frequency expenditure network data reveal about spending and inflation during COVID‑19? Staff Analytical Note 2020-20 Kim Huynh, Helen Lao, Patrick Sabourin, Angelika Welte The official consumer price index (CPI) inflation measure, based on a fixed basket set before the COVID 19 pandemic, may not fully reflect what consumers are currently experiencing. We partnered with Statistics Canada to construct a more representative index for the pandemic with weights based on real-time transaction and survey data. Content Type(s): Staff research, Staff analytical notes Topic(s): Inflation and prices, Payment clearing and settlement systems JEL Code(s): D, D1, D12, E, E3, E31, E4, E42, E5, E52
More Than Words: Fed Chairs’ Communication During Congressional Testimonies Staff Working Paper 2022-20 Michelle Alexopoulos, Xinfen Han, Oleksiy Kryvtsov, Xu Zhang We measure soft information contained in the congressional testimonies of U.S. Federal Reserve Chairs and analyze its effect on financial markets. Increases in the Chair’s text-, voice-, or face-emotion indices during these testimonies generally raise stock prices and lower their volatility. Content Type(s): Staff research, Staff working papers Topic(s): Central bank research, Financial markets, Monetary policy communications JEL Code(s): E, E5, E52, E58, E7, E71
Climate Variability and International Trade Staff Working Paper 2023-8 Geoffrey R. Dunbar, Walter Steingress, Ben Tomlin This paper quantifies the impact of hurricanes on seaborne international trade to the United States. Matching the timing of hurricane–trade route intersections with monthly U.S. port-level trade data, we isolate the unanticipated effects of a hurricane hitting a trade route using two separate identification schemes: an event study and a local projection. Content Type(s): Staff research, Staff working papers Topic(s): Climate change, International topics JEL Code(s): C, C2, C22, C5, F, F1, F14, F18, Q, Q5, Q54
Forecasting Inflation with the M1-VECM: Part Two Staff Working Paper 1998-6 Walter Engert, Scott Hendry A central bank's main concern is the general direction of future inflation, and not transitory fluctuations of the inflation rate. As a result, this paper is concerned with forecasting a simple measure of the trend of inflation, the eight-quarter CPI-inflation rate. The primary objective is to improve the M1-based vector-error-correction model (VECM) developed by Hendry […] Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Inflation and prices, Monetary aggregates JEL Code(s): C, C3, C5, E, E3, E4, E5
Market Structure and Cost Pass-Through in Retail Staff Working Paper 2013-5 Gee Hee Hong, Nicholas Li We examine the extent to which vertical and horizontal market structure can together explain incomplete retail pass-through. Content Type(s): Staff research, Staff working papers Topic(s): Inflation and prices, Monetary policy transmission JEL Code(s): E, E3, E30, E31, L, L1, L11, L16
Macroprudential Policy with Capital Buffers Staff Working Paper 2019-8 Josef Schroth The countercyclical capital buffer is part of Basel III, the set of regulatory measures developed in response to the financial crisis of 2007–09. This study focuses on how time-varying capital buffers can address inefficiencies in economies with endogenous financial crises. Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Credit and credit aggregates, Credit risk management, Financial stability, Financial system regulation and policies, Lender of last resort JEL Code(s): E, E1, E13, E3, E32, E4, E44