Financial Conditions Indexes for Canada
The authors construct three financial conditions indexes (FCIs) for Canada based on three approaches: an IS-curve-based model, generalized impulse-response functions, and factoranalysis. Each approach is intended to address one or more criticisms of the monetary conditions index (MCI) and existing FCIs. To evaluate their three FCIs, the authors consider five performance criteria: the consistency of each FCI's weight with economic theory, its graphical ability to predict turning points in the business cycle, its dynamic correlation with output, its in-sample fit in explaining output, and its out-of-sample performance in forecasting output. Using monthly data, the authors find, in general, that housing prices, equity prices, and bond yield risk premiums, in addition to short- and long-term interest rates and the exchange rate, are significant in explaining output from 1981 to 2000. They also find that the FCIs outperform the Bank of Canada's MCI in many areas.
|Date of creation:||2004|
|Date of revision:|
|Contact details of provider:|| Postal: 234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada|
Phone: 613 782-8845
Fax: 613 782-8874
Web page: http://www.bank-banque-canada.ca/
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Barry Cozier & Greg Tkacz, .
"The Term Structure and Real Activity in Canada,"
Staff Working Papers
94-3, Bank of Canada.
- Andrews, Donald W K, 1993.
"Tests for Parameter Instability and Structural Change with Unknown Change Point,"
Econometric Society, vol. 61(4), pages 821-56, July.
- Donald W.K. Andrews, 1990. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Cowles Foundation Discussion Papers 943, Cowles Foundation for Research in Economics, Yale University.
- Bernanke, Ben & Gertler, Mark, 1989. "Agency Costs, Net Worth, and Business Fluctuations," American Economic Review, American Economic Association, vol. 79(1), pages 14-31, March.
- Bernanke, Ben S & Blinder, Alan S, 1992.
"The Federal Funds Rate and the Channels of Monetary Transmission,"
American Economic Review,
American Economic Association, vol. 82(4), pages 901-21, September.
- Ben Bernanke, 1990. "The Federal Funds Rate and the Channels of Monetary Transnission," NBER Working Papers 3487, National Bureau of Economic Research, Inc.
- Ben S. Bernanke & Alan S. Blinder, 1989. "The federal funds rate and the channels of monetary transmission," Working Papers 89-10, Federal Reserve Bank of Philadelphia.
When requesting a correction, please mention this item's handle: RePEc:bca:bocawp:04-22. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.