Econometric and statistical methods
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On the Tail Risk Premium in the Oil Market
This paper shows that changes in market participants’ fear of rare events implied by crude oil options contribute to oil price volatility and oil return predictability. Using 25 years of historical data, we document economically large tail risk premia that vary substantially over time and significantly forecast crude oil futures and spot returns. -
November 7, 2017
Understanding Inflation: Getting Back to Basics
Governor Stephen S. Poloz discusses how recent weak inflation in Canada and other economies can be explained by fundamental factors. -
Identification of Random Resource Shares in Collective Households Without Preference Similarity Restrictions
Resource shares, defined as the fraction of total household spending going to each person in a household, are important for assessing individual material well-being, inequality and poverty. They are difficult to identify because consumption is measured typically at the household level, and many goods are jointly consumed, so that individual-level consumption in multi-person households is not directly observed. -
The Mode is the Message: Using Predata as Exclusion Restrictions to Evaluate Survey Design
Changes in survey mode (e.g., online, offline) may influence the values of survey responses, and may be particularly problematic when comparing repeated cross-sectional surveys. -
What’s Up with Unit Non-Response in the Bank of Canada’s Business Outlook Survey? The Effect of Staff Tenure
Since 1997, the Bank of Canada’s regional offices have been conducting the Business Outlook Survey (BOS), a quarterly survey of business conditions. Survey responses are gathered through face-to-face, confidential consultations with a sample of private sector firms representative of the various sectors, firm sizes and regions across Canada. -
A Dynamic Factor Model for Commodity Prices
In this note, we present the Commodities Factor Model (CFM), a dynamic factor model for a large cross-section of energy and non-energy commodity prices. The model decomposes price changes in commodities into a common “global” component, a “block” component confined to subgroups of economically related commodities and an idiosyncratic price shock component. -
Changes in Monetary Regimes and the Identification of Monetary Policy Shocks: Narrative Evidence from Canada
We use narrative evidence along with a novel database of real-time data and forecasts from the Bank of Canada's staff economic projections from 1974 to 2015 to construct a new measure of monetary policy shocks and estimate the effects of monetary policy in Canada. -
Did the Renewable Fuel Standard Shift Market Expectations of the Price of Ethanol?
It is commonly believed that the response of the price of corn ethanol (and hence of the price of corn) to shifts in biofuel policies operates in part through market expectations and shifts in storage demand, yet to date it has proved difficult to measure these expectations and to empirically evaluate this view. -
Optimal Estimation of Multi-Country Gaussian Dynamic Term Structure Models Using Linear Regressions
This paper proposes a novel asymptotic least-squares estimator of multi-country Gaussian dynamic term structure models that is easy to compute and asymptotically efficient, even when the number of countries is relatively large—a situation in which other recently proposed approaches lose their tractability.