G1 - General Financial Markets

• Futures Markets, Oil Prices and the Intertemporal Approach to the Current Account

  Staff Working Paper 2008-48 Elif Arbatli

  The intertemporal approach to the current account suggests modeling movements in the current account in a forward-looking, dynamic framework. In this framework, the current account reflects consumption smoothing of agents that lend and borrow from the rest of the world in the face of transitory shocks to income.

  Content Type(s): Staff research, Staff working papers Topic(s): Balance of payments and components JEL Code(s): C, C2, C22, F, F2, F21, F3, F32, G, G1, G13

• How Important Is Liquidity Risk for Sovereign Bond Risk Premia? Evidence from the London Stock Exchange

  Staff Working Paper 2008-47 Ron Alquist

  This paper uses the framework of arbitrage-pricing theory to study the relationship between liquidity risk and sovereign bond risk premia. The London Stock Exchange in the late 19th century is an ideal laboratory in which to test the proposition that liquidity risk affects the price of sovereign debt.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial markets, International topics JEL Code(s): F, F2, F21, F3, F34, F36, G, G1, G12, G15

• McCallum Rules, Exchange Rates, and the Term Structure of Interest Rates

  Staff Working Paper 2008-43 Antonio Diez de los Rios

  McCallum (1994a) proposes a monetary rule where policymakers have some tendency to resist rapid changes in exchange rates to explain the forward premium puzzle.

  Content Type(s): Staff research, Staff working papers Topic(s): Exchange rates, Interest rates, Monetary policy transmission JEL Code(s): E, E4, E43, F, F3, F31, G, G1, G12, G15

• Financial Constraints and the Cash-Holding Behaviour of Canadian Firms

  Staff Discussion Paper 2008-16 Darcey McVanel, Nikita Perevalov

  The proportion of assets held by the average Canadian firm in the form of cash has increased steadily since the early 1990s, and is now roughly twice as large as in 1990. The literature has established that the cash-holding behaviour of firms is highly correlated with financial constraints and firm characteristics.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Sectoral balance sheet JEL Code(s): G, G1, G11, G3, G32

• The Impact of Sovereign Wealth Funds on International Financial Stability

  Staff Discussion Paper 2008-14 Tamara Gomes

  Over the recent period, many emerging-market economies and commodity-exporting nations have experienced unprecedented growth and accumulated substantial amounts of foreign exchange reserves. The management of these foreign reserves has led to the emergence of important financial actors: sovereign wealth funds (SWFs).

  Content Type(s): Staff research, Staff discussion papers Topic(s): Financial stability, Recent economic and financial developments JEL Code(s): F, F2, F21, F3, F31, F32, G, G1, G15

• Macroeconomic Determinants of the Term Structure of Corporate Spreads

  Staff Working Paper 2008-29 Jun Yang

  We investigate the macroeconomic determinants of corporate spreads using a no-arbitrage technique. Structural shocks are identified by a New-Keynesian model. Treasury bonds are priced in an affine model with time-varying risk premia.

  Content Type(s): Staff research, Staff working papers Topic(s): Debt management, Financial markets, Interest rates JEL Code(s): E, E4, E43, E44, G, G1, G12

• Good Policies or Good Fortune: What Drives the Compression in Emerging Market Spreads?

  Staff Working Paper 2008-25 Philipp Maier, Garima Vasishtha

  Since 2002, spreads on emerging market sovereign debt have fallen to historical lows. Given the close links between sovereign spreads, capital flows to emerging markets, and economic growth, understanding the factors driving these spreads is very important. We address this issue in two stages.

  Content Type(s): Staff research, Staff working papers Topic(s): Development economics, Financial stability, International topics JEL Code(s): E, E4, E43, F, F3, F34, G, G1, G12, G15

• Information Shocks, Jumps, and Price Discovery - Evidence from the U.S. Treasury Market

  Staff Working Paper 2008-22 George Jiang, Ingrid Lo, Adrien Verdelhan

  We examine large price changes, known as jumps, in the U.S. Treasury market. Using recently developed statistical tools, we identify price jumps in the 2-, 3-, 5-, 10-year notes and 30-year bond during the period of 2005-2006.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial markets JEL Code(s): G, G1, G12, G14

• On Portfolio Separation Theorems with Heterogeneous Beliefs and Attitudes towards Risk

  Staff Working Paper 2008-16 Fousseni Chabi-Yo, Eric Ghysels, Eric Renault

  The early work of Tobin (1958) showed that portfolio allocation decisions can be reduced to a two stage process: first decide the relative allocation of assets across the risky assets, and second decide how to divide total wealth between the risky assets and the safe asset. This so called twofund separation relies on special assumptions on either returns or preferences.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial markets, Market structure and pricing JEL Code(s): C, C5, C52, D, D5, D58, G, G1, G11, G12

• Credit, Asset Prices, and Financial Stress in Canada

  Staff Working Paper 2008-10 Miroslav Misina, Greg Tkacz

  Historical narratives typically associate financial crises with credit expansions and asset price misalignments. The question is whether some combination of measures of credit and asset prices can be used to predict these events.

  Content Type(s): Staff research, Staff working papers Topic(s): Credit and credit aggregates, Financial stability JEL Code(s): E, E5, G, G1, G10