Staff analytical notes

• Measuring household financial stress in Canada using consumer surveys

  Staff Analytical Note 2024-5 Nicolas Bédard, Patrick Sabourin

  We use data from the Canadian Survey of Consumer Expectations to understand how households are coping with high inflation and high interest rates. We build a subjective measure of financial stress and find that the level of stress is at a historical high but remains manageable for most households.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Domestic demand and components, Financial stability, Monetary policy transmission, Recent economic and financial developments JEL Code(s): D, D1, D14, G, G5, H, H3

• What has been putting upward pressure on CORRA?

  Staff Analytical Note 2024-4 Boran Plong, Neil Maru

  From the autumn of 2023 into early 2024, the Canadian Overnight Repo Rate Average (CORRA), a measure of the cost of overnight general collateral Canadian dollar repos, was consistently well above the Bank’s target for the overnight rate. We find that, among several factors, long bond positions that require repo financing are the main driver of the recent upward pressure on CORRA.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Financial markets, Interest rates, Lender of last resort, Monetary policy implementation JEL Code(s): D, D4, D5, D53, E, E4, E43, E44, E5, E52, G, G1, G12

• How changes in the share of constrained households affect the effectiveness of monetary policy

  Staff Analytical Note 2024-3 Felipe Alves, Sushant Acharya

  We measure how the change in the share of constrained households in Canada following the COVID-19 recession has impacted the effectiveness of monetary policy.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Coronavirus disease (COVID-19), Monetary policy transmission JEL Code(s): E, E2, E21, E4, E40, E5, E50

• Market structure of cryptoasset exchanges: Introduction, challenges and emerging trends

  Staff Analytical Note 2024-2 Vladimir Skavysh, Jacob Sharples, Sofia Priazhkina, Salman H. Hasham

  This paper provides an overview of cryptoasset exchanges. We contrast their design with exchanges in traditional financial markets and discuss emerging regulatory trends and innovations aimed at solving the problems cryptoasset exchanges face.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Digital currencies and fintech, Payment clearing and settlement systems JEL Code(s): G, G1, G15, L, L1

• Modelling Canadian mortgage debt and payments in a semi-structural model

  Staff Analytical Note 2024-1 Fares Bounajm, Austin McWhirter

  We show how Canadian mortgage debt dynamics can be modelled in a semi-structural macroeconomic model, such as the Bank of Canada’s LENS. The model we propose accounts for Canada’s unique mortgage debt structure.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Economic models, Monetary policy transmission JEL Code(s): E, E2, E27, E4, E43, E47, G, G5, G51

• The impact of higher interest rates on mortgage payments

  Staff Analytical Note 2023-19 Maria teNyenhuis, Adam Su

  We investigate how the increase in interest rates since early 2022 is affecting mortgage payments. By November 2023, less than half of mortgage holders had faced higher payments. Many borrowers will see a sizable increase in payments at renewal, although income growth could help mitigate the impact.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Credit and credit aggregates, Financial institutions, Interest rates, Recent economic and financial developments JEL Code(s): D, D1, E, E4, E5, G, G2, G21

• Finding the balance—measuring risks to inflation and to GDP growth

  Staff Analytical Note 2023-18 Bruno Feunou, James Kyeong

  Using our new quantitative tool, we show how the risks to the inflation and growth outlooks have evolved over the course of 2023.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Business fluctuations and cycles, Econometric and statistical methods JEL Code(s): C, C3, C32, C5, C58, E, E4, E44, G, G1, G17

• Assessing the effects of higher immigration on the Canadian economy and inflation

  Staff Analytical Note 2023-17 Julien Champagne, Erik Ens, Xing Guo, Olena Kostyshyna, Alexander Lam, Corinne Luu, Sarah Miller, Patrick Sabourin, Joshua Slive, Temel Taskin, Jaime Trujillo, Shu Lin Wee

  We assess the complex macroeconomic implications of Canada’s recent population increases. We find that newcomers significantly boost the non-inflationary, potential growth of the economy, but existing imbalances in the housing sector may be exacerbated. Greater housing supply is needed to complement the long-term economic benefits of population growth.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Domestic demand and components, Housing, Inflation and prices, Labour markets, Potential output, Recent economic and financial developments JEL Code(s): A, A1, A10, E, E2, E20, E3, E31, J, J1, J11, J15

• Machine learning for economics research: when, what and how

  Staff Analytical Note 2023-16 Ajit Desai

  This article reviews selected papers that use machine learning for economics research and policy analysis. Our review highlights when machine learning is used in economics, the commonly preferred models and how those models are used.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Central bank research, Econometric and statistical methods, Economic models JEL Code(s): A, A1, A10, B, B2, B23, C, C4, C45, C5, C55

• Decentralized finance: Innovations and challenges

  Staff Analytical Note 2023-15 Jonathan Chiu, Hanna Yu

  Decentralized finance surged in popularity around 2020. We explore its value and limitations and highlight some potential regulatory concerns.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Digital currencies and fintech, Financial stability, Payment clearing and settlement systems JEL Code(s): G, G1, G2