G18 - Government Policy and Regulation

• Characterizing the Canadian Financial Cycle with Frequency Filtering Approaches

  Staff Analytical Note 2018-34 Andrew Lee-Poy

  In this note, I use two multivariate frequency filtering approaches to characterize the Canadian financial cycle by capturing fluctuations in the underlying variables with respect to a long-term trend. The first approach is a dynamically weighted composite, and the second is a stochastic cycle model.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Business fluctuations and cycles, Econometric and statistical methods, Financial stability, Monetary and financial indicators, Recent economic and financial developments JEL Code(s): C, C0, C01, C1, C13, C14, C18, C3, C32, C5, C51, C52, E, E3, E32, E6, E66, G, G0, G01, G1, G18

• The Impact of Government Debt Supply on Bond Market Liquidity: An Empirical Analysis of the Canadian Market

  Staff Working Paper 2018-35 Jeffrey Gao, Jianjian Jin, Jacob Thompson

  This paper finds that Government of Canada benchmark bonds tend to be more illiquid over the subsequent month when there is a large increase in government debt supply. The result is both statistically and economically significant, stronger for the long-term than the short-term sector, and is robust when other macro factors are controlled for.

  Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Debt management, Financial markets JEL Code(s): D, D5, D53, G, G1, G12, G18, G2, G3, G32

• A Primer on the Canadian Bankers’ Acceptance Market

  Staff Discussion Paper 2018-6 Kaetlynd McRae, Danny Auger

  This paper discusses how the bankers’ acceptance (BA) market in Canada is organized and its essential link to the Canadian Dollar Offered Rate (CDOR). Globally, BAs are a niche product used only in a limited number of jurisdictions.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Financial institutions, Financial markets, Financial system regulation and policies, Market structure and pricing JEL Code(s): G, G1, G18, G2, G21, G23
• June 7, 2018

  The Bank of Canada’s Financial System Survey

  Financial System Review - June 2018 Guillaume Bédard-Pagé, Ian Christensen, Scott Kinnear, Maxime Leboeuf

  This report presents the details of a new semi-annual survey that will improve the Bank of Canada’s surveillance across the financial system and deepen efforts to engage with financial system participants. The survey collects expert opinions on the risks to and resilience of the Canadian financial system as well as on emerging trends and financial innovations. The report presents an overview of the survey and provides high-level results from the spring 2018 survey.

  Content Type(s): Publications, Financial System Review articles Topic(s): Financial institutions, Financial markets, Financial services, Financial stability, Financial system regulation and policies, Recent economic and financial developments JEL Code(s): C, C8, C83, G, G1, G11, G18, G2, G28, G3, G32

• Order Flow Segmentation, Liquidity and Price Discovery: The Role of Latency Delays

  Staff Working Paper 2018-16 Michael Brolley, David Cimon

  Latency delays—known as “speed bumps”—are an intentional slowing of order flow by exchanges. Supporters contend that delays protect market makers from high-frequency arbitrage, while opponents warn that delays promote “quote fading” by market makers. We construct a model of informed trading in a fragmented market, where one market operates a conventional order book and the other imposes a latency delay on market orders.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial markets, Financial system regulation and policies, Market structure and pricing JEL Code(s): G, G1, G14, G18

• Asymmetric Risks to the Economic Outlook Arising from Financial System Vulnerabilities

  Staff Analytical Note 2018-6 Thibaut Duprey

  When financial system vulnerabilities are elevated, they can give rise to asymmetric risks to the economic outlook. To illustrate this, I consider the economic outlook presented in the Bank of Canada’s October 2017 Monetary Policy Report in the context of two key financial system vulnerabilities: high levels of household indebtedness and housing market imbalances.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Business fluctuations and cycles, Econometric and statistical methods, Financial stability, Financial system regulation and policies, Monetary and financial indicators, Monetary policy and uncertainty, Recent economic and financial developments JEL Code(s): C, C0, C01, C1, C11, C15, E, E1, E17, E3, E32, E37, E4, E44, E47, E5, E58, E6, E66, G, G0, G01, G1, G18