The author examines the role of collateral in an environment where lenders and borrowers possess identical information and similar beliefs about its future value. Using option-pricing techniques, he shows that a secured loan contract is equivalent to a regular bond and an embedded option to the...

This paper examines the ability of a number of financial variables to predict Canadian recessions. Regarding methodology, we follow closely the technique employed by Estrella and Mishkin (1998), who use a probit model to predict U.S. recessions up to eight quarters in advance. Our main finding...

The author re-examines the demand-for-money theory in an intertemporal optimization model. The demand for real money balances is derived to be a function of real income and the rates of return of all financial assets traded in the economy. Unlike the traditional money-demand relation, however,...

The author suggests that commodity-linked bonds could provide a potential means for less-developed countries (LDCs) to raise money on the international capital markets, rather than through standard forms of financing. The issue of this type of bond could provide an opportunity for...