FSRC - Financial System Research Center

• Heterogeneous Beliefs and Housing-Market Boom-Bust Cycles in a Small Open Economy

  Staff Working Paper 2009-15 Hajime Tomura

  This paper introduces heterogeneous beliefs among households in a small open economy model for the Canadian economy. The model suggests that simultaneous boom-bust cycles in house prices, output, investment, consumption and hours worked emerge when credit-constrained mortgage borrowers expect that future house prices will rise and this expectation is neither shared by savers nor realized ex-post.

  Content Type(s): Staff research, Staff working papers Topic(s): Credit and credit aggregates, Financial stability, Inflation targets JEL Code(s): E, E4, E44, E5, E52

• Testing for Financial Contagion with Applications to the Canadian Banking System

  Staff Working Paper 2009-14 Fuchun Li

  The author proposes a new test for financial contagion based on a non-parametric measure of the cross-market correlation. The test does not depend on the assumption that the data are drawn from a given probability distribution; therefore, it allows for maximal flexibility in fitting into the data.

  Content Type(s): Staff research, Staff working papers Topic(s): Central bank research, Econometric and statistical methods, Financial stability JEL Code(s): C, C1, C12, G, G0, G01, G1, G15