Exports and the Exchange Rate: A General Equilibrium Perspective Staff Working Paper 2022-18 Patrick Alexander, Abeer Reza How do a country’s exports change when its currency depreciates? Does it matter which forces drive the exchange rate deprecation in the first place? We find that this relationship varies greatly depending on what drives exchange rate movements, and we conclude that the direct relationship between the exchange rate and exports is weak for Canada. Content Type(s): Staff research, Staff working papers Research Topic(s): Balance of payments and components, Business fluctuations and cycles, Exchange rate regimes, Exchange rates, International topics, Monetary policy transmission, Trade integration JEL Code(s): F, F3, F31, F32, F33, F4, F41
Why Fixed Costs Matter for Proof-of-Work Based Cryptocurrencies Staff Working Paper 2020-27 Rodney J. Garratt, Maarten van Oordt Can Bitcoin survive? Some say it will become vulnerable to attacks as the rewards for processing Bitcoin transactions continue to decline. The economics of fixed costs suggest the specialized hardware used to mine Bitcoin may be key to its survival. Content Type(s): Staff research, Staff working papers Research Topic(s): Digital currencies and fintech, Payment clearing and settlement systems JEL Code(s): G, G1, G10, L, L1, L11
The Cost of Equity in Canada: An International Comparison Staff Working Paper 2008-21 Jonathan Witmer This paper calculates an implied cost of equity for 19 developed countries from 1991 to 2006. During this period, there has been a decline in the cost of equity of about 10-15 bps per year, which can be partially attributed to declining government yields and declining inflation. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial markets, International topics JEL Code(s): G, G3, G30, G38
Strategic Complementarities and Money Market Fund Liquidity Management Staff Working Paper 2017-14 Jonathan Witmer Following the financial crisis, there has been increased regulatory focus on the management of liquidity in mutual funds and, specifically, whether funds hold enough liquidity to guard against the potential for investor runs. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial institutions, Financial markets JEL Code(s): F, F3, F30, G, G0, G01, G1, G18, G2, G20
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 Research Topic(s): Economic models, Inflation and prices, Monetary aggregates JEL Code(s): C, C3, C5, E, E3, E4, E5
Price Competition and Concentration in Search and Negotiation Markets: Evidence from Mortgage Lending Staff Working Paper 2012-4 Jason Allen, Robert Clark, Jean-François Houde This paper examines the impact of bank consolidation on mortgage rates in order to evaluate the extent to which mortgage markets are competitive. Mortgage markets are decentralized and so rates are determined through a search and negotiation process. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial institutions, Financial services, Interest rates JEL Code(s): G, G2, L, L1
A Note on Contestability in the Canadian Banking Industry Staff Discussion Paper 2007-7 Jason Allen, Ying Liu The authors examine the degree of contestability in the Canadian banking system using the H-statistic proposed by Panzar and Rosse (1987) and modified by Bikker, Spierdijk, and Finnie (2006). A modification is necessary because the standard approach of controlling for size using total assets leads to an upward bias in the H-statistic. The authors propose […] Content Type(s): Staff research, Staff discussion papers Research Topic(s): Financial institutions JEL Code(s): G, G2, G21, L, L1, L11
Central Bank Digital Currency and Banking Choices Staff Working Paper 2024-4 Jiaqi Li, Andrew Usher, Yu Zhu To what extent does a central bank digital currency (CBDC) compete with bank deposits? To answer this question, we develop and estimate a structural model where each household chooses which financial institution to deposit their digital money with. Content Type(s): Staff research, Staff working papers Research Topic(s): Central bank research, Digital currencies and fintech JEL Code(s): E, E5, E50, E58
Jump-Diffusion Long-Run Risks Models, Variance Risk Premium and Volatility Dynamics Staff Working Paper 2013-12 Jianjian Jin This paper calibrates a class of jump-diffusion long-run risks (LRR) models to quantify how well they can jointly explain the equity risk premium and the variance risk premium in the U.S. financial markets, and whether they can generate realistic dynamics of risk-neutral and realized volatilities. Content Type(s): Staff research, Staff working papers Research Topic(s): Asset pricing, Economic models JEL Code(s): G, G1, G12, G17
Predicting Canadian Recessions Using Financial Variables: A Probit Approach Staff Working Paper 1998-5 Joseph Atta-Mensah, Greg Tkacz This paper examines the ability of a number of financial variables to predict Canadian recessions. Regarding methodology, we follow closely the technique employed by Estrella and Mishkin (1998), who use a probit model to predict U.S. recessions up to eight quarters in advance. Our main finding is that the spread between the yield on Canadian […] Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Interest rates JEL Code(s): E, E3, E32, E4, E43