E4 - Money and Interest Rates
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A Look Inside the Box: Combining Aggregate and Marginal Distributions to Identify Joint Distributions
This paper proposes a method for estimating the joint distribution of two or more variables when only their marginal distributions and the distribution of their aggregates are observed. Nonparametric identification is achieved by modelling dependence using a latent common-factor structure. -
Bitcoin Awareness and Usage in Canada: An Update
This note provides an update of the results of the 2017 Bitcoin Omnibus Survey (BTCOS) conducted by the Bank of Canada from December 12 to 15, 2017. The BTCOS was previously conducted in November and December 2016 and the results were reported in Henry et al. (2017, forthcoming). -
The Neutral Rate in Canada: 2018 Estimates
The neutral nominal policy rate serves as a benchmark for assessing the degree of monetary stimulus and provides a medium- to long-run anchor for the policy rate. Since quantitative measures of the neutral rate are subject to considerable uncertainty, Bank staff rely on four different approaches to estimate the Canadian neutral rate. -
Bootstrapping Mean Squared Errors of Robust Small-Area Estimators: Application to the Method-of-Payments Data
This paper proposes a new bootstrap procedure for mean squared errors of robust small-area estimators. We formally prove the asymptotic validity of the proposed bootstrap method and examine its finite sample performance through Monte Carlo simulations. -
Swedish Riksbank Notes and Enskilda Bank Notes: Lessons for Digital Currencies
This paper examines the experience of Sweden with government notes and private bank notes to determine how well the Swedish experience corresponds to that of Canada and the United States. Sweden is important to study because it has had government notes in circulation for more than 350 years, and it had government notes before private bank notes. -
Ambiguity, Nominal Bond Yields and Real Bond Yields
Equilibrium bond-pricing models rely on inflation being bad news for future growth to generate upward-sloping nominal yield curves. We develop a model that can generate upward-sloping nominal and real yield curves by instead using ambiguity about inflation and growth. -
Interest Rate and Renewal Risk for Mortgages
In this note, we explore two types of risk faced by holders of mortgages and home equity lines of credit (HELOCs) in the context of rising interest rates: interest rate risk and renewal risk. -
Noisy Monetary Policy
We introduce limited information in monetary policy. Agents receive signals from the central bank revealing new information (“news") about the future evolution of the policy rate before changes in the rate actually take place. However, the signal is disturbed by noise. -
Uncovered Return Parity: Equity Returns and Currency Returns
We propose an uncovered expected returns parity (URP) condition for the bilateral spot exchange rate. URP implies that unilateral exchange rate equations are misspecified and that equity returns also affect exchange rates. Fama regressions provide evidence that URP is statistically preferred to uncovered interest rate parity (UIP) for nominal bilateral exchange rates between the US dollar and six countries (Australia, Canada, Japan, Norway, Switzerland and the UK) at the monthly frequency. -
The (Un)Demand for Money in Canada
A novel dataset from the Bank of Canada is used to estimate the deposit functions for banknotes in Canada for three denominations: $1,000, $100 and $50. The broad flavour of the empirical findings is that denominations are different monies, and the structural estimates identify the underlying sources of the non-neutrality.