Staff research

• Characterizing the Canadian Financial Cycle with Frequency Filtering Approaches

  Staff Analytical Note 2018-34 Andrew Lee-Poy

  In this note, I use two multivariate frequency filtering approaches to characterize the Canadian financial cycle by capturing fluctuations in the underlying variables with respect to a long-term trend. The first approach is a dynamically weighted composite, and the second is a stochastic cycle model.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Business fluctuations and cycles, Econometric and statistical methods, Financial stability, Monetary and financial indicators, Recent economic and financial developments JEL Code(s): C, C0, C01, C1, C13, C14, C18, C3, C32, C5, C51, C52, E, E3, E32, E6, E66, G, G0, G01, G1, G18

• Multibank Holding Companies and Bank Stability

  Staff Working Paper 2018-51 Radoslav Raykov, Consuelo Silva-Buston

  This paper studies the relationship between bank holding company affiliation and the individual and systemic risk of banks. Using the 2005 hurricane season in the US as an exogenous shock to bank balance sheets, we show that banks that are part of a holding parent company are more resilient than independent banks.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial stability JEL Code(s): G, G1, G2

• Introducing a Systematic Measure of Idiosyncratic Prices

  Staff Analytical Note 2018-33 Madigan Dockrill, Laurence Savoie-Chabot

  There is a risk that Bank of Canada staff may inadvertently be biased when analyzing inflation: when inflation surprises on the downside, staff might emphasize negative idiosyncratic factors. When inflation surprises on the upside, staff might emphasize the positive idiosyncratic factors.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Inflation and prices, Recent economic and financial developments JEL Code(s): E, E3, E31

• Is a Cashless Society Problematic?

  Staff Discussion Paper 2018-12 Walter Engert, Ben Fung, Scott Hendry

  The use of bank notes in Canada for payments has declined consistently for some time, and similar trends are evident in other countries. This has led some observers to predict a cashless society in the future.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Bank notes, Digital currencies and fintech, Financial services, Payment clearing and settlement systems JEL Code(s): E, E4, E41, E42, E5

• The Size and Destination of China’s Portfolio Outflows

  Staff Discussion Paper 2018-11 Rose Cunningham, Eden Hatzvi, Kun Mo

  The size of China’s financial system raises the possibility that the liberalization of its capital account could have a large effect on the global financial system. This paper provides a counterfactual scenario analysis that estimates what the size and direction of China’s overseas portfolio investments would have been in 2015 if China had had no restrictions on these outflows.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Balance of payments and components, Econometric and statistical methods, International topics JEL Code(s): C, C2, C23, F, F2, F21, F3, F32, G, G1, G15

• Disaggregating Household Sensitivity to Monetary Policy by Expenditure Category

  Staff Analytical Note 2018-32 Tony Chernis, Corinne Luu

  Because the Bank of Canada has started withdrawing monetary stimulus, monitoring the transmission of these changes to monetary policy will be important. Subcomponents of consumption and housing will likely respond differently to a monetary policy tightening, both in terms of the aggregate effect and timing.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Business fluctuations and cycles, Domestic demand and components, Econometric and statistical methods, Housing, Interest rates, Monetary policy transmission, Recent economic and financial developments JEL Code(s): C, C3, C32, E, E2, E21, E22, E4, E43, E47, E5, E52
• September 30, 2018

  Research Update - September 2018

  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

• 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

• Have Liquidity and Trading Activity in the Canadian Corporate Bond Market Deteriorated?

  Staff Analytical Note 2018-31 Chen Fan, Sermin Gungor, Guillaume Nolin, Jun Yang

  Since 2010, the liquidity of corporate bonds has improved on average, while their trading activity has remained stable. We find that the liquidity and trading activity of riskier bonds or bonds issued by firms in different sectors have been stable. However, the liquidity and trading activity of bonds issued by banks have improved. We observe short-lived episodes of deterioration in liquidity and trading activity.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Financial markets JEL Code(s): G, G1, G12, G14

• 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