Staff research

• Wage Growth in Canada and the United States: Factors Behind Recent Weakness

  Staff Analytical Note 2017-8 Dany Brouillette, James Ketcheson, Olena Kostyshyna, Jonathan Lachaine

  This note examines the relatively subdued pace of wage growth in Canada since the commodity price decline in 2014 and assesses whether the weakness is attributable to cyclical (e.g., labour market slack) or structural factors (e.g., resource reallocation and demographic change).

  Content Type(s): Staff research, Staff analytical notes Topic(s): Labour markets, Recent economic and financial developments JEL Code(s): E, E2, E24, J, J3, J30

• A Structural Interpretation of the Recent Weakness in Business Investment

  Staff Analytical Note 2017-7 Russell Barnett, Rhys R. Mendes

  Since 2012, business investment growth has slowed considerably in advanced economies, averaging a little less than 2 per cent versus the 4 per cent growth rates experienced in the period leading up to crisis. Several recent studies have attributed a large part of the weakness in business investment to cyclical factors, including soft aggregate demand, and, to a lesser degree, heightened uncertainty and tighter financial conditions.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Business fluctuations and cycles, Domestic demand and components, Recent economic and financial developments JEL Code(s): E, E2, E22, E3, E37
• June 30, 2017

  Research Update - June 2017

  This monthly newsletter features the latest research publications by Bank of Canada economists including external publications and working papers published on the Bank of Canada’s website.

  Content Type(s): Staff research, Research newsletters

• Understanding Monetary Policy and its Effects: Evidence from Canadian Firms Using the Business Outlook Survey

  Staff Working Paper 2017-24 Matthieu Verstraete, Lena Suchanek

  This paper shows (i) that business sentiment, as captured by survey data, matters for monetary policy decisions in Canada, and (ii) how business perspectives are affected by monetary policy shocks. Measures of business sentiment (soft data) are shown to have systematic explanatory power for monetary policy decisions over and above typical Taylor rule variables.

  Content Type(s): Staff research, Staff working papers Topic(s): Firm dynamics, Interest rates, Monetary policy transmission JEL Code(s): D, D2, D22, E, E4, E44, E5, E52

• Understanding the Cross‐Country Effects of US Technology Shocks

  Staff Working Paper 2017-23 Thuy Lan Nguyen, Wataru Miyamoto

  Business cycles are substantially correlated across countries. Yet most existing models are not able to generate substantial transmission through international trade. We show that the nature of such transmission depends fundamentally on the features determining the responsiveness of labor supply and labor demand to international relative prices.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Economic models, International topics JEL Code(s): E, E3, E30, F, F4, F41, F44, F6, F62

• Detecting Scapegoat Effects in the Relationship Between Exchange Rates and Macroeconomic Fundamentals

  Staff Working Paper 2017-22 Lorenzo Pozzi, Barbara Sadaba

  This paper presents a new testing method for the scapegoat model of exchange rates that aims to tighten the link between the theory on scapegoats and its empirical implementation. This new testing method consists of a number of steps.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Exchange rates, International financial markets JEL Code(s): C, C3, C32, F, F3, F31, G, G1, G15

• What Explains Month-End Funding Pressure in Canada?

  Staff Discussion Paper 2017-9 Christopher S. Sutherland

  The Canadian overnight repo market persistently shows signs of latent funding pressure around month-end periods. Both the overnight repo rate and Bank of Canada liquidity provision tend to rise in these windows. This paper proposes three non-mutually exclusive hypotheses to explain this phenomenon.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Financial markets, Interest rates, Monetary policy framework, Monetary policy implementation, Monetary policy transmission JEL Code(s): E, E4, E41, E43, E5, E52, E58, F, F3, F36, G, G1, G14, G15, G2, G21

• A Three‐Frequency Dynamic Factor Model for Nowcasting Canadian Provincial GDP Growth

  Staff Discussion Paper 2017-8 Tony Chernis, Gabriella Velasco, Calista Cheung

  This paper estimates a three‐frequency dynamic factor model for nowcasting Canadian provincial gross domestic product (GDP). Canadian provincial GDP is released by Statistics Canada on an annual basis only, with a significant lag (11 months).

  Content Type(s): Staff research, Staff discussion papers Topic(s): Business fluctuations and cycles, Econometric and statistical methods, Regional economic developments JEL Code(s): C, C5, C53, E, E3, E32, E37, R, R1, R11

• Downward Nominal Wage Rigidity, Inflation and Unemployment: New Evidence Using Micro‐Level Data

  Staff Analytical Note 2017-6 Dany Brouillette, Natalia Kyui

  Recent evidence suggests that the extent of downward nominal wage rigidity (DNWR) in the Canadian labour market has risen following the 2008–09 recession (see Brouillette, Kostyshyna and Kyui 2016).

  Content Type(s): Staff research, Staff analytical notes Topic(s): Econometric and statistical methods, Inflation and prices, Labour markets JEL Code(s): E, E2, E24, E3, E31, J, J3, J30

• Should Central Banks Worry About Nonlinearities of their Large-Scale Macroeconomic Models?

  Staff Working Paper 2017-21 Vadym Lepetyuk, Lilia Maliar, Serguei Maliar

  How wrong could policymakers be when using linearized solutions to their macroeconomic models instead of nonlinear global solutions?

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Econometric and statistical methods, Economic models JEL Code(s): C, C6, C61, C63, C68, E, E3, E31, E5, E52