The authors explore the usefulness of macroeconomic models in analyzing global economic developments by examining movements in commodity prices between July 2007 and July 2008. They use the Bank of Canada's version of the Global Economy Model and investigate the longerterm outlook for commodity...

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. This is a...

This paper examines the interaction between monetary policy and macroprudential policy and whether policy makers should respond to financial imbalances. To address this issue, we build a dynamic general equilibrium model that features financial market frictions and financial shocks as well as...

This paper studies a dynamic version of the Holmstrom-Tirole model of intermediated finance. I show that competitive equilibria are not constrained efficient when the economy experiences a financial crisis. A pecuniary externality entails that banks’ desire to accumulate capital over time...

This report presents a simple theorretical model that shows the quantitative impact of the increased interest rate premiums on economic performance. Some evidence is presented that suggests high Canadian interest rate premiums were an important factor explaining the general weakness of economic...

Loan-level data on the uncollateralized overnight loan market is generated using payment data from Canada's Large Value Transfer System (LVTS) and a modified version of the methodology proposed in Furfine (1999). There were on average just under 100 loans extended in this market each day from...

In this paper, we provide empirical evidence on the factors that motivated emerging economies to change their capital outflow controls in recent decades. Liberalization of capital outflow controls can allow emerging-market economies (EMEs) to reduce net capital inflow (NKI) pressures, but may...

Interest rates in China are composed of a mix of both market-determined interest rates (interbank rates and bond yields), and regulated interest rates (retail lending and deposit rates), reflecting China’s gradual process of interest rate liberalization. This paper investigates the main...

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...

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...