This paper uses Latent Semantic Analysis to extract information from Bank of Canada communication statements and investigates what type of information affects returns and volatility in short-term as well as long-term interest rate markets over the 2002-2008 period. Discussions about geopolitical...

The goal of this paper is to tackle two problems in standard limited-par- ticipation models: (1) an interest rate liquidity effect that is not as persist- ent as in the data; and (2) nominal variables that are unrealistically volatile. To address these problems, we introduce nominal wage and...

The goal of this paper is to shed light on the nature of the monetary transmission mechanism. Specifically, we attempt to tackle two problems in standard limited-participation models: (1) the interest rate liquidity effect is not as persistent as in the data; and (2) some nominal variables are...

A vector error-correction Model (VECM) that Forecasts inflation between the current quarter and eight quarters ahead is found to privide significant leading information about inflation. The model focusses on th effects of deviations of M1 from its long-run demand but also includes, among other...

Simple econometric tests reported in the literature consistently report what appears to be a bias in inflation expectations. These results are commonly interpreted as constituting evidence overturning the hypothesis of rational expectations. In this paper, we investigate the validity of such an...

Capital markets and their related financial instruments make an important contribution to the welfare of Canadians. The Bank of Canada is interested in the efficient functioning of capital markets through each of its responsibilities for monetary policy, the financial system, and funds...

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...

Several recent papers report evidence of an apparent statistical bias in inflation expectations and interpret these findings as overturning the rational expectations hypothesis. In this paper, we investigate the validity of such an interpretation. We present a computational dynamic general...