E - Macroeconomics and Monetary Economics

• Monetary Policy Uncertainty: A Tale of Two Tails

  Staff Working Paper 2018-50 Tatjana Dahlhaus, Tatevik Sekhposyan

  We document a strong asymmetry in the evolution of federal funds rate expectations and map this observed asymmetry into measures of monetary policy uncertainty. We show that periods of monetary policy tightening and easing are distinctly related to downside (policy rate is higher than expected) and upside (policy rate is lower than expected) uncertainty.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Econometric and statistical methods, Monetary policy and uncertainty, Monetary policy communications, Monetary policy transmission JEL Code(s): C, C1, C18, C3, C32, E, E0, E02, E4, E43, E5, E52

• Financial Development Beyond the Formal Financial Market

  Staff Working Paper 2018-49 Lin Shao

  This paper studies the effects of financial development, taking into account both formal and informal financing. Using cross-country firm-level data, we document that informal financing is utilized more by rich countries than poor countries.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial markets, Firm dynamics, Productivity JEL Code(s): E, E4, E44, O, O1, O17, O4, O47

• How Long Does It Take You to Pay? A Duration Study of Canadian Retail Transaction Payment Times

  Staff Working Paper 2018-46 Geneviève Vallée

  Using an exclusive data set of payment times for retail transactions made in Canada, I show that cash is the most time-efficient method of payment (MOP) when compared with payments by debit and credit cards. I model payment efficiency using Cox proportional hazard models, accounting for consumer choice of MOP.

  Content Type(s): Staff research, Staff working papers Topic(s): Bank notes, Econometric and statistical methods, Payment clearing and settlement systems JEL Code(s): C, C2, C25, C3, C36, C4, C41, D, D2, D23, E, E4, E41, E42

• Price Selection

  Staff Working Paper 2018-44 Carlos Carvalho, Oleksiy Kryvtsov

  We propose a simple, model-free way to measure selection in price setting and its contribution to inflation dynamics. The proposed measure of price selection is based on the observed comovement between inflation and the average level from which adjusting prices depart.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Inflation and prices, Monetary policy transmission JEL Code(s): E, E3, E31, E5, E51

• Weakness in Non-Commodity Exports: Demand versus Supply Factors

  Staff Analytical Note 2018-28 José Dorich, Vadym Lepetyuk, Jonathan Swarbrick

  We use the Terms-of-Trade Economic Model (ToTEM) to conduct demand- and supply-driven simulations, both of which deliver weakness in Canadian non-commodity exports relative to foreign activity in line with recent data.

  Content Type(s): Staff research, Staff analytical notes Topic(s): International topics, Monetary policy, Recent economic and financial developments, Trade integration JEL Code(s): E, E5, E52, F, F1, F10, F14, F17

• Characterizing Canada’s Export Sector by Industry: A Supply-Side Perspective

  Staff Analytical Note 2018-27 Taylor Webley

  This note examines supply-side trends in Canadian non-energy industries and their implications for export performance. Between 2002 and 2016, capital stocks and total labour input declined in many industries that export non-energy goods. These soft trends in the factors of production have likely contributed to the decline in non-energy exports in about half of the goods industries analyzed in this note.

  Content Type(s): Staff research, Staff analytical notes Topic(s): International topics, Productivity JEL Code(s): E, E2, E22, E23, E24, F, F1, F19

• What Is Restraining Non-Energy Export Growth?

  Staff Analytical Note 2018-25 Dany Brouillette, José Dorich, Chris D'Souza, Adrienne Gagnon, Claudia Godbout

  This note summarizes the key findings from Bank of Canada staff analytical work examining the reasons for the recent weakness in Canadian non-energy exports. Canada steadily lost market share in US non-energy imports between 2002 and 2017, mostly reflecting continued and broad-based competitiveness losses.

  Content Type(s): Staff research, Staff analytical notes Topic(s): International topics, Monetary policy, Recent economic and financial developments, Trade integration JEL Code(s): E, E5, E52, F, F1, F10, F14, F17

• The Welfare Cost of Inflation Revisited: The Role of Financial Innovation and Household Heterogeneity

  Staff Working Paper 2018-40 Shutao Cao, Césaire Meh, José-Víctor Ríos-Rull, Yaz Terajima

  We document that, across households, the money consumption ratio increases with age and decreases with consumption, and that there has been a large increase in the money consumption ratio during the recent era of very low interest rates. We construct an overlapping generations (OLG) model of money holdings for transaction purposes subject to age (older households use more money), cohort (younger generations are exposed to better transaction technology), and time effects (nominal interest rates affect money holdings).

  Content Type(s): Staff research, Staff working papers Topic(s): Inflation: costs and benefits JEL Code(s): E, E2, E21, E4, E41

• Sluggish Forecasts

  Staff Working Paper 2018-39 Monica Jain

  Given the influence that agents’ expectations have on key macroeconomic variables, it is surprising that very few papers have tried to extrapolate agents’ “true” expectations directly from the data. This paper presents one such approach, starting with the hypothesis that there is sluggishness in inflation and real GDP growth forecasts.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Inflation and prices JEL Code(s): E, E3, E31, E37

• Nowcasting Canadian Economic Activity in an Uncertain Environment

  Staff Discussion Paper 2018-9 Tony Chernis, Rodrigo Sekkel

  This paper studies short-term forecasting of Canadian real GDP and its expenditure components using combinations of nowcasts from different models. Starting with a medium-sized data set, we use a suite of common nowcasting tools for quarterly real GDP and its expenditure components.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Econometric and statistical methods JEL Code(s): C, C5, C53, E, E3, E37, E5, E52