Showing papers by "Government of Canada published in 2015"

Role of morality in the experience of guilt and shame within the armed forces

Abstract: OBJECTIVE: Despite advances in our understanding of mental health issues among military forces, a large proportion of military personnel continue to exhibit deployment-related psychological issues. Recent work has identified symptoms of guilt and shame related to moral injury as contributing significantly to combat-related mental health issues. This systematic scoping review explores the association between morality and symptoms of guilt and shame within military forces. METHOD: A search of the literature pertaining to guilt, shame and morality within military samples was conducted. RESULTS: Nineteen articles were selected for review. There is strong evidence linking exposure to and the perceived perpetration of moral transgressions with experiences of guilt and shame. Critically, symptoms of guilt and shame were related to adverse mental health outcomes, particularly the onset of post-traumatic stress disorder (PTSD). No studies have explored moral judgment in conjunction with assessments of guilt or moral injury. CONCLUSION: These findings have important implications for the prevention and treatment of PTSD-related symptoms in military samples. By measuring moral judgment prior to deployment, it may be possible to predict the likelihood of incurring moral injuries and the development of associated symptoms. Early intervention programmes aimed at ameliorating guilt and shame are required to prevent the long-term development of deployment-related psychological distress. Language: en

Using Low Frequency Information for Predicting High Frequency Variables

Abstract: We analyze how to incorporate low frequency information in models for predicting high frequency variables. In doing so, we introduce a new model, the reverse unrestricted MIDAS (RU-MIDAS), which has a periodic structure but can be estimated by simple least squares methods and used to produce forecasts of high frequency variables that also incorporate low frequency information. We compare this model with two versions of the mixed frequency VAR, which so far had been only applied to study the reverse problem, that is, using the high frequency information for predicting low frequency variables. We then implement a simulation study to evaluate the relative forecasting ability of the alternative models in finite samples. Finally, we conduct several empirical applications to assess the relevance of quarterly survey data for forecasting a set of monthly macroeconomic indicators. Overall, it turns out that low frequency information is important, particularly so when it is just released.

Change Detection with Compact Polarimetric SAR for Monitoring Wetlands

Abstract: . Compact polarimetric synthetic aperture radar (SAR) architecture is an SAR configuration that consists of transmitting a single circular polarization (left or right) or a 45° oriented linear signal while receiving two linear polarizations, horizontal and vertical. In this study we investigate the potential of the compact polarimetric SAR mode for wetland monitoring applications. Whitewater Lake located in Manitoba, Canada, is selected as a case study where simulated compact polarimetric SAR data are obtained using RADARSAT-2 Fine Quad-POL SAR images. The ability of the compact polarimetric data to monitor wetlands using the Wishart-Chernoff distance is studied and compared to the results obtained using fully polarimetric data. Results of this study show that compact polarimetry provides monitoring capabilities for wetlands. Promising change detection mapping results based on the compact polarimetric coherency matrices are obtained using the Wishart-Chernoff distance. This could be useful for fla...

Assessing the Financial and Financing Conditions of Firms in Europe: The Financial Module in CompNet

Abstract: This paper provides an encompassing description of the various indicators compiled in the financial module of CompNet using balance sheet information of European firms. We investigate whether and to which extent the heterogeneous financial positions of firms have affected firms’ investment decisions, especially during the recent crisis. Our results confirm the relevance of leverage for investment, in addition to other common determinants, such as cash flow or sales growth. In particular, we find evidence that higher levels of indebtedness act as a drag on investment. We investigate cash holding policies and find significant differences across firm sizes and degrees of financial constraints. Furthermore, our data confirm the pro-cyclicality of firm profitability and its negative association with financial constraints. Finally, we exploit the richness of this new dataset to document the relationships between firms’ financial and financing conditions and their productivity.

Exchange Rate Pass-Through, Currency of Invoicing and Market Share

Abstract: Nous analysons l’effet de la structure de marche sur le choix du degre de transmission des variations du taux de change et la monnaie de facturation retenue dans les echanges internationaux. L’originalite de l’etude est l’interet porte aux deux cotes du marche, c’est-a-dire aux exportateurs et aux importateurs.

Inflation-Forecast Targeting: Applying the Principle of Transparency

Abstract: Many central banks in emerging and advanced economies have adopted an inflation-forecast targeting (IFT) approach to monetary policy, in order to successfully establish a stable, lowinflation environment. To support policy making, each has developed a structured system of forecasting and policy analysis appropriate to its needs. A common component is a modelbased forecast with an endogenous policy interest rate path. The approach is characterized, among other things, by transparent communications—some IFT central banks go so far as to publish their policy interest rate projection. Some elements of this regime, although a work still in progress, are worthy of consideration by central banks that have not yet officially adopted full-fledged inflation targeting.

Bank Loans for Private and Public Firms in a Liquidity Crunch

Abstract: Banks reliance on short-term funding has increased over time. While an effective source of financing in good times, the 2007 financial crisis has exposed the vulnerability of banks and ultimately firms to such a liability structure. We show that it was the banks that relied most on wholesale funding that contracted their lending the greatest during the crisis. Our results suggest, however, that banks propagate liquidity shocks by reducing credit only to a certain type of borrowers. Importantly, in the financial crisis banks passed the liquidity shock only to public firms and not to private firms. Loans to private firms were affected through a different channel, largely through higher retained shares by lead arrangers. Vulnerable banks increased their monitoring of informationally opaque firms for which the potential for informational rents is the highest.

Avoiding Dark Corners: A Robust Monetary Policy Framework for the United States

Abstract: The Fed has taken several steps towards strengthening its monetary framework over the past several years. Those steps have supported the Fed’s efforts to stimulate the economy through forward guidance despite being constrained by having policy rates at zero. We show that an optimal control approach to monetary policy, which includes the publication of a baseline forecast and a description of the uncertainties around that outlook, combined with an improvement in the Fed’s communications toolkit, could further enhance the effectiveness of Fed policy. In the current conjuncture, such a risk management approach to monetary policy would result in both a later liftoff of policy rates and a modest, but planned, overshooting of inflation.

Efficiency and Bargaining Power in the Interbank Loan Market

Abstract: Using detailed transactions-level data on interbank loans, we examine the efficiency of an overnight interbank lending market, and the bargaining power of its participants. Our analysis relies on the equilibrium concept of the core, which imposes a set of no-arbitrage conditions on trades in the market. For Canada's Large-Value Transfer System, we show that while the market is fairly efficient, systemic inefficiency persists throughout our sample. The level of inefficiency matches distinct phases of both the Bank of Canada's operations as well as phases of the 2007-2008 financial crisis. We find that bargaining power tilted sharply towards borrowers as the financial crisis progressed, and (surprisingly) towards riskier borrowers.

Systemic Risk of European Banks: Regulators and Markets

Abstract: Rules and regulations may have different impacts on risk-taking by individual banks and on banks’ systemic risk levels. That is why implementing prudential rules and policies requires careful consideration of their impact on bank risk and systemic risk. This chapter assesses whether market-based measures of systemic risk and recent regulatory indicators provide similar rankings on the systemically importance of large European banks. We find evidence that regulatory indicators of systemic importance are positively related to systemic risk. In particular, banks with higher scores on regulatory indicators have a stronger link to the system in the event of financial stress, rather than having a higher level of bank risk.

Domestic and Multilateral Effects of Capital Controls in Emerging Markets

Abstract: Using a novel dataset on changes in capital controls and currency-based prudential measures in 17 major emerging market economies (EMEs) over the period 2001-2011, this paper provides new evidence on domestic and spillover effects of capital controls before and after the global financial crisis. Our results, based on panel VARs on quarterly data, suggest that capital control actions do not allow countries to avoid the trade-offs of the monetary policy trilemma. Where they have a desired impact on the trilemma variables – net capital inflows, monetary policy autonomy and the exchange rate – the size of that impact is generally small. While we find some evidence of effectiveness before the global financial crisis, the usefulness of these measures weakened in the post-crisis environment of abundant global liquidity and relatively strong economic growth in EMEs. Our results also show that capital control policies can have unintended consequences, as resident outflows offset the impact of capital control actions on gross inflows (or vice versa). These findings highlight the importance of the macroeconomic context and of the increasing role of resident flows in understanding the effectiveness of capital inflow management. Using panel near-VARs, we find significant spillovers of capital control actions in BRICS (Brazil, Russia, India, China and South Africa) to other EMEs during the 2000s. Spillover effects were more important in the aftermath of the global financial crisis than before the crisis, and arose from inflow tightening actions, rather than outflow easing measures. The channels through which these policies spilled over to other countries were exchange rates as well as capital flows (especially cross-border bank lending). Spillovers seem to be more prevalent in Latin America than in Asia, reflecting the greater role of cross-border banking and more open capital accounts in the former countries. These results are robust to various specifications of our models.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Limited Nominal Indexation of Optimal Financial Contracts

Abstract: We study a model with repeated moral hazard where financial contracts are not fully indexed to inflation because nominal prices are observed with delay as in Jovanovic and Ueda 1997. More constrained firms sign contracts that are less indexed to inflation and, as a result, their investment is more sensitive to nominal price shocks. We also find that the overall degree of nominal indexation increases with price uncertainty. An implication of this is that economies with higher inflation uncertainty are less vulnerable to a price shock of a given magnitude. The micro predictions of the model are tested empirically using macro and firm-level data from Canada.

Identification of First-Price Auctions With Biased Beliefs

Abstract: This paper exploits variation in the number of bidders to separately identify the valuation distribution and the bidders' belief about the valuation distribution in first-price auctions with independent private values. Exploiting variation in auction volume the result is extended to environments with risk averse bidders. In an illustrative application we fail to reject the null hypothesis of correct beliefs.

Optimal Intermediary Rents

Abstract: This paper studies a dynamic production economy with financial intermediation. It is assumed that claims held on intermediaries cannot be fully enforced such that intermediation is subject to intermediary equity requirements. It is shown that competitive equilibria are not constrained efficient whenever the aggregate amount of intermediary equity in the economy is low enough to limit production. Specifically, a constrained social planner can achieve a Pareto improvement by creating long-term rents for intermediaries which immediately reduces intermediary equity requirements. The constrained-efficient allocation can be implemented by a positive tax on future intermediary activity.

Oil Price Forecasts for the Long-Term: Expert Outlooks, Models, or Both?

Abstract: Expert outlooks on the future path of oil prices are often relied on by industry participants and policymaking bodies for their forecasting needs. Yet little attention has been paid to the extent to which these area accurate. Using the regular publications by the Energy Information Administration (EIA), we examine the accuracy of annual recursive oil price forecasts generated by the National Energy Modeling System model of the Agency for forecast horizons of up to 15 years. Our results reveal that the EIA model is quite successful at beating the benchmark random walk model, but only at either end of the forecast horizons. We also show that, for the longer horizons, simple econometric forecasting models often produce similar if not better accuracy than the EIA model. Among these, time-varying specifications generally also exhibit stability in their forecast performance. Finally, while combining forecasts does not change the overall patterns, some additional accuracy gains are obtained at intermediate horizons, and in some cases forecast performance stability is also achieved.

The Price Distribution and Technological Shocks in Markets with Endogenous Search Intensity

Abstract: We provide a simple model that relates the search intensity of households for products to the price distribution and the wage. Households decide how much time to spend on work and on search for finding better deals in a market where firms charge different prices. Thus, the equilibrium price distribution and the wage depend on the endogenous search intensity and labor supply. Moreover, we show that positive technological shocks, which reduce price posting costs for firms, lead to an increase in labor supply, wages and to the average price, while they lead to a decrease in search effort. These results are consistent with recent empirical findings.

Do Investors Trade Too Much? A Laboratory Experiment

Abstract: We run experimental asset markets to investigate the emergence of excess trading and the occurrence of synchronised trading activity leading to crashes in the artificial markets. The market environment favours early investment in the risky asset and no posterior trading, i.e. a buy-and-hold strategy with a most probable return of over 600%. We observe that subjects trade too much, and due to the market impact that we explicitly implement, this is detrimental to their wealth. The asset market experiment was followed by risk aversion measurement. We find that preference for risk systematically leads to higher activity rates (and lower final wealth). We also measure subjects' expectations of future prices and find that their actions are fully consistent with their expectations. In particular, trading subjects try to beat the market and make profits by playing a buy low, sell high strategy. Finally, we have not detected any major market crash driven by collective panic modes, but rather a weaker but significant tendency of traders to synchronise their entry and exit points in the market.

Data Bases and Statistical Systems: Economics (Statistical Systems)

Abstract: The article on economic statistics comprises two major subjects. It touches upon the structure of economic statistics and describes how they are related to the system of national accounts. It also examines the major developments brought about in these statistics through the use of government administrative records, principally those related to taxation. The major development in economic statistics, 50 years ago, consisted in replacing cumbersome economic censuses by sample surveys that could be administered more frequently and at less cost. Developments today, however, mostly brought in by massive computer applications may make it possible to return to the census approach by using for statistical purposes what is collected anyway, as the government discharges its legal and operational responsibilities.