Financial Stress, Monetary Policy, and Economic Activity Staff Working Paper 2010-12 Fuchun Li, Pierre St-Amant This paper examines empirically the impact of financial stress on the transmission of monetary policy shocks in Canada. The model used is a threshold vector autoregression in which a regime change occurs if financial stress conditions cross a critical threshold. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial stability, Monetary policy and uncertainty JEL Code(s): C, C0, C01, E, E5, E50, G, G0, G01
Idiosyncratic Coskewness and Equity Return Anomalies Staff Working Paper 2010-11 Fousseni Chabi-Yo, Jun Yang In this paper, we show that in a model where investors have heterogeneous preferences, the expected return of risky assets depends on the idiosyncratic coskewness beta, which measures the co-movement of the individual stock variance and the market return. Content Type(s): Staff research, Staff working papers Research Topic(s): Economic models, Financial markets JEL Code(s): G, G1, G11, G12, G14, G3, G33
Market Expectations and Option Prices: Evidence for the Can$/US$ Exchange Rate Staff Discussion Paper 2010-2 Alejandro García, Andrei Prokopiw Security prices contain valuable information that can be used to make a wide variety of economic decisions. To extract this information, a model is required that relates market prices to the desired information, and that ideally can be implemented using timely and low-cost methods. Content Type(s): Staff research, Staff discussion papers Research Topic(s): Econometric and statistical methods, Exchange rates, Financial markets JEL Code(s): C, C0, C00, C02, G, G1, G13
Macroprudential Regulation and Systemic Capital Requirements Staff Working Paper 2010-4 Céline Gauthier, Alfred Lehar, Moez Souissi In the aftermath of the financial crisis, there is interest in reforming bank regulation such that capital requirements are more closely linked to a bank's contribution to the overall risk of the financial system. In our paper we compare alternative mechanisms for allocating the overall risk of a banking system to its member banks. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial stability JEL Code(s): C, C1, C15, C8, C81, E, E4, E44, G, G2, G21
Corporate Risk Taking and Ownership Structure Staff Working Paper 2010-3 Teodora Paligorova This paper investigates the determinants of corporate risk taking. Shareholders with substantial equity ownership in a single company may advocate conservative investment policies due to greater exposure to firm risk. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial markets, International topics JEL Code(s): G, G3, G31, G34
Search Frictions and Asset Price Volatility Staff Working Paper 2010-1 B. Ravikumar, Enchuan Shao We examine the quantitative effect of search frictions in product markets on asset price volatility. We combine several features from Shi (1997) and Lagos and Wright (2002) in a model without money. Households prefer special goods and general goods. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial markets, Market structure and pricing JEL Code(s): E, E4, E44, G, G1, G12
Regulatory Constraints on Bank Leverage: Issues and Lessons from the Canadian Experience Staff Discussion Paper 2009-15 Étienne Bordeleau, Allan Crawford, Christopher Graham The Basel capital framework plays an important role in risk management by linking a bank's minimum capital requirements to the riskiness of its assets. Nevertheless, the risk estimates underlying these calculations may be imperfect, and it appears that a cyclical bias in measures of risk-adjusted capital contributed to procyclical increases in global leverage prior to the recent financial crisis. Content Type(s): Staff research, Staff discussion papers Research Topic(s): Financial institutions, Financial stability, Financial system regulation and policies JEL Code(s): G, G0, G01, G2, G21, G28
Market Timing of Long-Term Debt Issuance Staff Discussion Paper 2009-14 Jonathan Witmer The literature on market timing of long-term debt issuance yields mixed evidence that managers can successfully time their debt-maturity issuance. The early results that are indicative of debt-maturity timing are not robust to accounting for structural breaks or to other measures of debt maturity from firm-level data that account for call and put provisions in […] Content Type(s): Staff research, Staff discussion papers Research Topic(s): Financial markets, International topics JEL Code(s): G, G3, G30, G38
Network Analysis and Canada's Large Value Transfer System Staff Discussion Paper 2009-13 Lana Embree, Tom Roberts Analysis of the characteristics and structure of a network of financial institutions can provide insight into the complex relationships and interdependencies that exist in a payment, clearing, and settlement system (PCSS), and allow an intuitive understanding of the PCSS's efficiency, stability, and resiliency. Content Type(s): Staff research, Staff discussion papers Research Topic(s): Financial stability, Payment clearing and settlement systems JEL Code(s): D, D8, D85, G, G1, G10
Measures of Aggregate Credit Conditions and Their Potential Use by Central Banks Staff Discussion Paper 2009-12 Alejandro García, Andrei Prokopiw Understanding the nature of credit risk has important implications for financial stability. Since authorities – notably, central banks – focus on risks that have systemic implications, it is crucial to develop ways to measure these risks. Content Type(s): Staff research, Staff discussion papers Research Topic(s): Credit and credit aggregates, Financial markets, Financial stability JEL Code(s): G, G1, G10, G12, G13