Interest rates
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Starting from a Blank Page? Semantic Similarity in Central Bank Communication and Market Volatility
Press releases announcing and explaining monetary policy decisions play a critical role in the communication strategy of central banks. Because of their market-moving potential, it is particularly important how they are drafted. Often, central banks start from the previous statement and update the earlier text with only small changes. -
Relationships in the Interbank Market
The market for central bank reserves is mainly over-the-counter and exhibits a core-periphery network structure. This paper develops a model of relationship lending in the unsecured interbank market. In equilibrium, a tiered lending network arises endogenously as banks choose to build relationships to insure against liquidity shocks and to economize on the cost to trade in the interbank market. -
Global Macro Risks in Currency Excess Returns
We study a cross section of carry-trade-generated currency excess returns in terms of their exposure to global fundamental macroeconomic risk. -
16 May 2016 A New Era of Central Banking: Unconventional Monetary Policies
Central banks can implement unconventional monetary policy measures to provide additional easing when policy interest rates come close to their lower limit. To date, the international experience with tools such as quantitative easing and negative interest rates has been largely positive. Central banks may also use several such measures simultaneously, with often mutually reinforcing effects. Yet, unconventional tools are also subject to potential limits, and the costs associated with these measures could rise with extensive and prolonged use. -
Tractable Term-Structure Models and the Zero Lower Bound
We greatly expand the space of tractable term-structure models. We consider one example that combines positive yields with rich volatility and correlation dynamics. Bond prices are expressed in closed form and estimation is straightforward. -
19 November 2015 A Survey of Consumer Expectations for Canada
The Bank of Canada recently launched a quarterly survey to measure the expectations of Canadian households: the Canadian Survey of Consumer Expectations (CSCE). The data collected provide comprehensive information about consumer expectations for and uncertainty about inflation, the labour market and household finance. This article describes the CSCE and illustrates its potential to offer rich information about Canadian consumers for researchers and policy-makers. -
Testing for the Diffusion Matrix in a Continuous-Time Markov Process Model with Applications to the Term Structure of Interest Rates
The author proposes a test for the parametric specification of each component in the diffusion matrix of a d-dimensional diffusion process. Overall, d (d-1)/2 test statistics are constructed for the off-diagonal components, while d test statistics are constructed for the main diagonal components. -
Euro Area Government Bonds—Integration and Fragmentation During the Sovereign Debt Crisis
The paper analyzes the integration of euro area sovereign bond markets during the European sovereign debt crisis. It tests for contagion (i.e., an intensification in the transmission of shocks across countries), fragmentation (a reduction in spillovers) and flight-to-quality patterns, exploiting the heteroskedasticity of intraday changes in bond yields for identification. -
Labour Share Fluctuations in Emerging Markets: The Role of the Cost of Borrowing
This paper contributes to the literature by documenting labour income share fluctuations in emerging-market economies and proposing an explanation for them. Time-series data indicate that emerging markets differ from developed markets in terms of changes in the labour share over the business cycle. -
The Neutral Rate of Interest in Canada
A measure of the neutral policy interest rate can be used to gauge the stance of monetary policy. We define the neutral rate as the real policy rate consistent with output at its potential level and inflation equal to target after the effects of all cyclical shocks have dissipated.