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Estimating the Policy Rule from Money Market Rates when Target Rate Changes Are Lumpy

Fontaine, Jean-Sébastien - Bank of Canada - 2012

Most central banks effect changes to their target or policy rate in discrete increments (e.g., multiples of 0.25%) following public announcements on scheduled dates. Still, for most applications, researchers rely on the assumption that the policy rate changes linearly with economic conditions...

Persistent link: https://www.econbiz.de/10010598589

Macroeconomic Determinants of the Term Structure of Corporate Spreads

Yang, Jun - Bank of Canada - 2008

We investigate the macroeconomic determinants of corporate spreads using a no-arbitrage technique. Structural shocks are identified by a New-Keynesian model. Treasury bonds are priced in an affine model with time-varying risk premia. Corporate bonds are priced in a reduced-form credit risk model...

Persistent link: https://www.econbiz.de/10005673354

Convergence of Government Bond Yields in the Euro Zone: The Role of Policy Harmonization

Côté, Denise; Graham, Christopher - Bank of Canada - 2004

path to Economic and Monetary Union (EMU), and assess how these policies, including the introduction of the common currency … evidence that increased harmonization of monetary and fiscal policies on the path to EMU contributed greatly to the convergence … consists of other European Union (EU) countries not included in EMU (Denmark, Sweden, and the United Kingdom), and the second …

Persistent link: https://www.econbiz.de/10005162403

The Canadian Macroeconomy and the Yield Curve: An Equilibrium-Based Approach

Garcia, René; Luger, Richard - Bank of Canada - 2005

The authors develop and estimate an equilibrium-based model of the Canadian term structure of interest rates. The proposed model incorporates a vector-autoregression description of key macroeconomic dynamics and links them to those of the term structure, where identifying restrictions are based...

Persistent link: https://www.econbiz.de/10005673296

An International Dynamic Term Structure Model with Economic Restrictions and Unspanned Risks

Bauer, Gregory H.; Rios, Antonio Diez de los - Bank of Canada - 2012

We construct a multi-country affine term structure model that contains unspanned macroeconomic and foreign exchange risks. The canonical version of the model is derived and is shown to be easy to estimate. We show that it is important to impose restrictions (including global asset pricing, carry...

Persistent link: https://www.econbiz.de/10009493657

A New Linear Estimator for Gaussian Dynamic Term Structure Models

Rios, Antonio Diez de los - Bank of Canada - 2013

This paper proposes a novel regression-based approach to the estimation of Gaussian dynamic term structure models that avoids numerical optimization. This new estimator is an asymptotic least squares estimator defined by the no-arbitrage conditions upon which these models are built. We discuss...

Persistent link: https://www.econbiz.de/10010640466

Uncovering Inflation Expectations and Risk Premiums From Internationally Integrated Financial Markets

Fung, Ben; Mitnick, Scott; Remolona, Eli - Bank of Canada - 1999

Theory and empirical evidence suggest that the term structure of interest rates reflects risk premiums as well as market expectations about future inflation and real interest rates. We propose an approach to extracting such premiums and expectations by exploiting both the comovements among...

Persistent link: https://www.econbiz.de/10005808326

McCallum Rules, Exchange Rates, and the Term Structure of Interest Rates

Rios, Antonio Diez de los - Bank of Canada - 2008

McCallum (1994a) proposes a monetary rule where policymakers have some tendency to resist rapid changes in exchange rates to explain the forward premium puzzle. We estimate this monetary policy reaction function within the framework of an affine term structure model to find that, contrary to...

Persistent link: https://www.econbiz.de/10005808355

Can Affine Term Structure Models Help Us Predict Exchange Rates?

Rios, Antonio Diez de los - Bank of Canada - 2006

The author proposes an arbitrage-free model of the joint behaviour of interest and exchange rates whose exchange rate forecasts outperform those produced by a random-walk model, a vector autoregression on the forward premiums and the rate of depreciation, and the standard forward premium...

Persistent link: https://www.econbiz.de/10005162430

A No-Arbitrage Analysis of Macroeconomic Determinants of Term Structures and the Exchange Rate<br>

Chabi-Yo, Fousseni; Yang, Jun - Bank of Canada - 2007

We study the joint dynamics of macroeconomic variables, bond yields, and the exchange rate in an empirical two-country New-Keynesian model complemented with a no-arbitrage term structure model. With Canadian and US data, we are able to study the impact of macroeconomic shocks from both countries...

Persistent link: https://www.econbiz.de/10005162497

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