The Evolving Financial System and Public Policy: Conference Highlights and Lessons

At the 12th annual Bank of Canada economic conference, held in Ottawa on 4 and 5 December 2003, representatives from various public and private organizations and Bank of Canada staff discussed papers presented on three key issues affecting the financial system: financial contagion, the implications of bank diversification, and financial sector regulation. Papers on financial contagion studied the effect of globalization on Canadian foreign-asset exposures, developed a general-equilibrium model of a competitive interfirm lending market in which firms can borrow or lend, and used market-based indicators to determine the probability that contagion can be generated by interbank exposures. The papers on bank diversification focused on the links between the changing behaviour of financial institutions and risk-return trade-offs. Issues of financial sector regulation included the relationship between governance and financial sector soundness, the theoretical basis of bank regulations for capital requirements, and the implications of bank capital requirements for the transmission of monetary policy. A panel discussion provided extended discussion of the conference papers.

Coyote Medicine and Biotech Culture: Mad Scientists, Jesus and Evil Aliens, and the Dangerous and Uncontrollable Power of Women

The author explores a dialogue between Native American religion and culture, Christianity, and science, for the purpose of determining some ways in which Native American religious tradition can offer a helpful perspective and corrective for some of the theological and ethical dilemmas that arise from historical interrelatedness of science and \"conquering \" Christianity. A kind of secular Christianity-of-conquest has been used as a justification for unreflected and ethically dubious choices in science. Working with Trickster stories and concepts, is it possible to engage the teachings of Jesus in new and subtle ways to make critical assessments of developments in biotechnology

Financial Stress, Monetary Policy, and Economic Activity

The recent global crisis was characterized by a remarkable intensity in the negative feedback process between financial sector developments and the real economy. Exceptional measures were required to break this process, and the crisis stimulated interest in the relationship between financial sector developments, the real economy, and monetary policy. The authors examine this relationship by reviewing the relevant literature and then estimating a model with Canadian data. Both theoretical models and empirical findings point to the possibility of non-linear relationships between monetary policy, financial stress, and the real economy. The research indicates that when the economy can move into different regimes of financial stress, monetary policy can influence the likelihood of moving from one regime to another. It also implies that monetary policy actions have stronger effects when financial stress is high and that the tightening of monetary policy appears to have more powerful effects than easing.

Do the Hodrick-Prescott and Baxter-King Filters Provide a Good Approximation of Business Cycles?

In this paper, the authors examine how well the Hodrick-Prescott (HP) and the band-pass filter recently proposed by Baxter and King (BK) extract the business-cycle component of macroeconomic time series. The authors assess these filters using two different definitions of the business-cycle component. First, they define that component to be fluctuations lasting no fewer than six and no more than thirty-two quarters; this is the definition of business-cycle frequencies used by Baxter and King. Second, they define the business-cycle component on the basis of a decomposition of the series into permanent and transitory components. In both cases the conclusions are the same. The filters perform adequately when the spectrum of the original series has a peak at business-cycle frequencies. When the spectrum is dominated by low frequencies, the filters provide a distorted business cycle. Since most macroeconomic series have the typical Granger shape, the HP and BK filters perform poorly in terms of identifying the business cycles of these series. Dans la présente étude, les auteurs cherchent à évaluer l'efficacité avec laquelle le filtre de Hodrick-Prescott (HP) et le filtre passe-bande récemment proposé par Baxter et King (BK) permettent d'isoler la composante cyclique des séries macroéconomiques. Ils utilisent deux définitions du cycle économique pour comparer la performance de ces filtres. Selon la première définition (celle que retiennent Baxter et King), la composante cyclique correspond à des fluctuations d'une durée minimale de six trimestres et maximale de trente-deux trimestres. L'autre définition du cycle consiste dans la décomposition de la série en deux composantes, l'une permanente et l'autre transitoire. Les auteurs parviennent aux mêmes conclusions peu importe la définition utilisée. Les filtres donnent des résultats satisfaisants lorsque le spectre de la série initiale atteint un sommet au voisinage des fréquences comprises entre six et trente-deux trimestres. Lorsque le spectre est dominé par les basses fréquences, le cycle économique obtenu donne une image faussée de la réalité. Comme la forme spectrale de la plupart des séries macroéconomiques ressemble à celle que Granger a mise en lumière, les filtres HP et BK réussissent mal à isoler la composante cyclique de ces séries.Mechanical filters; business cycles; spectrum

Unequal opportunities and human capital formation

This paper develops a tractable, heterogeneous agents general equilibrium model where agents face different costs of access to the educational system. The paper explores the relation between inequality of opportunities (in the form of differential costs of access to the educational process) and efficiency (the levels of human capital and output). More precisely, the results from the simulation of the model suggest that a higher level of inequality of opportunities is associated with a lower level of average human capital, lower output per worker and higher income (wage) inequality. In other words, the model (based on standard assumptions) does not predict a trade-off between efficiency and equal opportunity in human capital formationHuman Capital, Inequality, Equity-Efficiency Tradeoff

Real Exchange Rate Indexes for the Canadian Dollar

In this article, the authors explain the methodology used to construct real exchange rate (RER) indexes. They also compare and assess various Canadian RER indexes from both an empirical and conceptual standpoint. The authors conclude that both theory and empirical evidence suggest that the best RER indexes are those based on unit labour costs. They note, however, that, for practical reasons, policy-makers should also consider RER indexes based on prices when formulating monetary policy.

Online Mutual Foreground Segmentation for Multispectral Stereo Videos

The segmentation of video sequences into foreground and background regions is a low-level process commonly used in video content analysis and smart surveillance applications. Using a multispectral camera setup can improve this process by providing more diverse data to help identify objects despite adverse imaging conditions. The registration of several data sources is however not trivial if the appearance of objects produced by each sensor differs substantially. This problem is further complicated when parallax effects cannot be ignored when using close-range stereo pairs. In this work, we present a new method to simultaneously tackle multispectral segmentation and stereo registration. Using an iterative procedure, we estimate the labeling result for one problem using the provisional result of the other. Our approach is based on the alternating minimization of two energy functions that are linked through the use of dynamic priors. We rely on the integration of shape and appearance cues to find proper multispectral correspondences, and to properly segment objects in low contrast regions. We also formulate our model as a frame processing pipeline using higher order terms to improve the temporal coherence of our results. Our method is evaluated under different configurations on multiple multispectral datasets, and our implementation is available online.Comment: Preprint accepted for publication in IJCV (December 2018

Biominerals - source and inspiration for novel advanced materials

Biomineralization seems an odd sort of word. How can you combine biology and minerals? However, a quick look around brings to light many familiar objects that are examples of biominerals. Most dramatic are the coral reefs and sea shells of the marine environment (calcium carbonate) and human bone and teeth (calcium hydroxyapatite) but there are many other examples. In the past 10 years, an increasing number of biominerals has been reported (Table 1). Interest in the biological and chemical processes that lead to biomineralization, howeyer, has only developed rather recently. Early observations were made by paleontologists who were interested in the preservation, through geological time, of the hard parts of organisms such as shells and skeletons but only in 1989 did the field really come of age with the almost simultaneous publication of three monographs covering current knowledge of the biological, biochemical, chemical and taxonomic aspects of biomineralization (Mann et al. 1989; Lowenstam & Weiner 1989; Simkiss & Wilbur 1989)

Financial Stress, Monetary Policy, and Economic Activity

This paper examines empirically the impact of financial stress on the transmission of monetary policy shocks in Canada. The model used is a threshold vector autoregression in which a regime change occurs if financial stress conditions cross a critical threshold. Using the financial stress index developed by Illing and Liu (2006) as a measure of the Canadian financial stress conditions, the authors examine questions such as: Do contractionary and expansionary monetary policy shocks have symmetric effects? Do financial stress conditions play a role as a nonlinear propagator of monetary policy shocks? Does monetary policy have the same effect on the real economy in the low financial stress regime and in the high financial stress regime? Suppose that the economy is currently in a given financial stress regime, do monetary policy shocks have a substantial effect on the transition probability of moving from the given regime to the other? The empirical findings reveal that (i) contractionary monetary shocks typically have a larger effect on output than expansionary monetary shocks; (ii) the effects of large and small shocks are approximately proportional; (iii) expansionary monetary shocks have larger effects on output in the high financial stress regime than in the low financial stress regime; (iv) large expansionary monetary shocks increase the likelihood of moving to, or remaining in, the low financial stress regime; (v) typically, high financial stress regime has been characterized by weaker output growth, higher inflation, and higher interest rates.Financial stability; Monetary policy and uncertainty