This paper compares the communication strategies of the Fed and the ECB and their impact on financial markets. Interest rates options were used to calculate daily probability distributions of market expectations and to examine how they are modified by central banks’ announcements. We found...

This paper presents Bank of Canada staff's current assessment of the US neutral rate, along with a newly developed set of models on which that assessment is based. The overall assessment is that the US neutral rate currently lies in a range of 1.75 to 2.75 percent. This represents a decline of...

This paper analyses the effects of open market operations on interest rates in a model in which agents must pay a fixed cost to exchange assets and cash. Asset markets are endogenously segmented in that some agents choose to pay the fixed cost and some do not. When the fixed cost is zero, the...

This paper presents Bank of Canada staff's current assessment of the US neutral rate, along with a newly developed set of models on which that assessment is based. The overall assessment is that the US neutral rate currently lies in a range of 1.75 to 2.75 percent. This represents a decline of...

After the 2008 financial collapse, the now popular measure of implied systemic risk called the absorption ratio was introduced. This statistic measures how closely the economy's markets are coupled. The more closely financial markets are coupled the more susceptible they are to systemic...

Procyclical assets tend to rise in value when the economy is expanding and fall with the advent of a recession. Countercyclical assets are instead negatively correlated with the state of the economy. Despite the use of optimization methods, hedging, and ad hoc rebalancing techniques most...

I show that a congruent, parsimonious, encompassing model discovered using David Hendry's econometric modelling approach and Autometrics can overcome the many inadequacies of the typical static models of US Treasury returns regressed on macroeconomic announcements. The typical specification...

This paper investigates high frequency movements of the yield curve around macroeconomic announcements by combining event studies and a no-arbitrage affine term structure model in a new Keynesian model with partial (or imperfect) information. I show that the model fits bond yields and...

Using text from 200 million pages of 13,000 US local newspapers and machine learning methods, we construct a 170-year-long measure of economic sentiment at the country and state levels, that expands existing measures in both the time series (by more than a century) and the cross-section. Our...

This paper develops and tests a model of the relation between the volatility of the exchange rate, default rates, the level of interest rates on loans, and the availability of credit, laying emphasis on frictions in the financial market, specifically foreclosure costs to collecting bad debts. On...