Affine Term-Structure Models: Theory and Implementation Staff Working Paper 2001-15 David Bolder Affine models describe the stylized time-series properties of the term structure of interest rates in a reasonable manner, they generalize relatively easily to higher dimensions, and a vast academic literature exists relating to their implementation. This combination of characteristics makes the affine class a natural introductory point for modelling interest rate dynamics. Content Type(s): Staff research, Staff working papers Research Topic(s): Debt management, Econometric and statistical methods, Interest rates JEL Code(s): C, C0, C5, G, G0
Monetary Policy Tradeoffs Between Financial Stability and Price Stability Staff Working Paper 2016-49 Malik Shukayev, Alexander Ueberfeldt We analyze the impact of interest rate policy on financial stability in an environment where banks can experience runs on their short-term liabilities, forcing them to sell assets at fire-sale prices. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial stability, Monetary policy framework, Monetary policy transmission JEL Code(s): D, D6, D62, E, E3, E32, E4, E44, G, G0, G01
The Safety of Government Debt Staff Working Paper 2013-34 Kartik Anand, Prasanna Gai We examine the safety of government bonds in the presence of Knightian uncertainty amongst financial market participants. In our model, the information insensitivity of government bonds is driven by strategic complementarities across counterparties and the structure of trading relationships. Content Type(s): Staff research, Staff working papers Research Topic(s): Economic models, Financial stability, International financial markets JEL Code(s): D, D8, D81, E, E4, E44, F, F0, F02, F4, F41, G, G1, G15
Testing Uncovered Interest Parity: A Continuous-Time Approach Staff Working Paper 2007-53 Antonio Diez de los Rios, Enrique Sentana Nowadays researchers can choose the sampling frequency of exchange rates and interest rates. Content Type(s): Staff research, Staff working papers Research Topic(s): Econometric and statistical methods, Exchange rates JEL Code(s): F, F3, F31, G, G1, G15
Monetary Policy and the Persistent Aggregate Effects of Wealth Redistribution Staff Working Paper 2021-38 Martin Kuncl, Alexander Ueberfeldt Monetary policy in the presence of nominal debt and labour supply heterogeneity creates a policy trade-off: a short-term economic stimulus leads to persistently reduced output over the medium term. Price-level targeting weakens this trade-off and is better able to stabilize inflation and output than inflation targeting. Content Type(s): Staff research, Staff working papers Research Topic(s): Monetary policy framework, Monetary policy transmission JEL Code(s): E, E2, E21, E5, E50
Inequality in Parental Transfers and Optimal Need-Based Financial Aid Staff Working Paper 2019-7 Youngmin Park This paper studies optimal need-based financial aid when parental transfers—unobserved by policymakers—vary across and within families of similar means. Using data on U.S. college students, I document substantial inequality in parental transfers, especially among wealthier families. I then analyze how this affects aid design aimed at reducing inefficiencies from borrowing constraints and the aid itself. Content Type(s): Staff research, Staff working papers Research Topic(s): Fiscal policy, Potential output, Productivity JEL Code(s): D, D1, D14, D6, D61, D64, D8, D82, I, I2, I22, J, J2, J24
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. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial institutions, Financial markets, Financial system regulation and policies, Monetary policy implementation JEL Code(s): E, E4, E41, E42, E5, E58, G, G2, G21, G28
The Bank of Canada's New Quarterly Projection Model, Part 3. The Dynamic Model: QPM Technical Report No. 75 Donald Coletti, Benjamin Hunt, David Rose, Robert Tetlow The Bank of Canada's new Quarterly Projection Model, QPM, combines the short-term dynamic properties necessary to support regular economic projections with the consistent behavioural structure necessary for policy analysis. Content Type(s): Staff research, Technical reports Research Topic(s): Economic models JEL Code(s): C, C5, C53, E, E1, E17
The Side Effects of Safe Asset Creation Staff Working Paper 2021-34 Sushant Acharya, Keshav Dogra The secular decline in real interest rates has created a challenge for monetary policy, now confronting the zero lower bound more often. An increase in the supply of safe assets reduces downward pressure on the natural interest rate. This allows monetary policy to reach price stability and full employment, but not without cost—permanently lower investment. Content Type(s): Staff research, Staff working papers Research Topic(s): Fiscal policy, Monetary policy implementation JEL Code(s): E, E3, E4, E5, G, G1, H, H6
The Role of Long-Term Contracting in Business Lending Staff Working Paper 2024-2 Phoebe Tian This paper examines inefficiencies arising from a lack of long-term contracting in small business lending in China. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial institutions JEL Code(s): D, D8, D83, D86, G, G2, G21, L, L1, L14, L2, L26