Staff analytical notes

• Behaviour in the Canadian large-value payment system: COVID-19 vs. the global financial crisis

  Staff Analytical Note 2021-7 Alexander Chaudhry, Anneke Kosse, Karen Sondergard

  Unlike the 2008–09 global financial crisis, the onset of the COVID-19 crisis did not raise stress levels in Canada’s Large Value Transfer System. Swift changes to the Bank of Canada’s collateral policy and its large-scale asset purchase programs likely eased liquidity pressures in the system.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Coronavirus disease (COVID-19), Financial institutions, Financial stability, Payment clearing and settlement systems JEL Code(s): E, E4, E42, E5, E51, E58, E6, E65

• Potential output and the neutral rate in Canada: 2021 update

  Staff Analytical Note 2021-6 Dany Brouillette, Guyllaume Faucher, Martin Kuncl, Austin McWhirter, Youngmin Park

  We expect potential output growth to be higher than in the October 2020 reassessment. By 2024, growth will be slightly above its average growth from 2010 to 2019. We assess that the Canadian nominal neutral rate continues to lie in the range of 1.75 to 2.75 percent.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Economic models, Interest rates, Labour markets, Monetary policy, Potential output, Productivity JEL Code(s): E, E2, E23, E24, E3, E37, E4, E43, E5, E52

• Assessing global potential output growth and the US neutral rate: April 2021

  Staff Analytical Note 2021-5 Thomas J. Carter, Xin Scott Chen, Ali Jaffery, Christopher Hajzler, Jonathan Lachaine, Peter Shannon, Subrata Sarker, Graeme Westwood, Beiling Yan

  We expect global potential output growth to rise to 3 percent by 2022. Relative to the last assessment in October 2020, potential output growth has been revised up across all the regions. The range of the US neutral rate remains unchanged relative to the autumn 2020 assessment.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Interest rates, Monetary policy, Potential output, Productivity JEL Code(s): E, E1, E2, E4, E5, F, F0, O, O4

• Update on housing market imbalances and household indebtedness

  Staff Analytical Note 2021-4 Mikael Khan, Olga Bilyk, Matthew Ackman

  Exceptional strength in the housing market during the pandemic is underpinning Canada’s economic recovery. However, two key vulnerabilities—housing market imbalances and elevated household indebtedness—have intensified.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Coronavirus disease (COVID-19), Credit and credit aggregates, Financial stability, Housing, Recent economic and financial developments, Sectoral balance sheet JEL Code(s): D, D1, D14, D8, D84, E, E5, G, G2, G21, G28, R, R2, R21

• What cured the TSX Equity index after COVID-19?

  Staff Analytical Note 2021-3 Guillaume Ouellet Leblanc, Jean-Sébastien Fontaine, Ryan Shotlander

  The TSX index rose by 9.5 percent in November 2020, adding large gains to an already sharp V-shaped recovery. The economic outlook improved at that time as well. We ask whether the stock market gains since last autumn are due to improving forecasts of firms’ earnings.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Asset pricing, Coronavirus disease (COVID-19), Financial markets JEL Code(s): G, G1, G12, G14

• Non-bank financial intermediation in Canada: a pulse check

  Staff Analytical Note 2021-2 Rohan Arora, Guillaume Bédard-Pagé, Philippe Besnier, Hayden Ford, Alan Walsh

  The Canadian non-bank financial intermediation (NBFI) sector saw strong growth in 2018 and 2019. In 2020, COVID‑19 caused a financial shock. We provide a preliminary analysis on the impact of COVID‑19 on the sector as well as an update on its growth.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Coronavirus disease (COVID-19), Financial institutions, Financial markets, Financial stability JEL Code(s): G, G0, G01, G2, G20, G23

• The Bank of Canada COVID‑19 stringency index: measuring policy response across provinces

  Staff Analytical Note 2021-1 Calista Cheung, Jerome Lyons, Bethany Madsen, Sarah Miller, Saarah Sheikh

  We construct an index that systematically measures and tracks the stringency of government policy responses to the COVID-19 pandemic across Canadian provinces. Researchers can use this stringency index to analyze how the pandemic is affecting the economy.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Business fluctuations and cycles, Coronavirus disease (COVID-19), Domestic demand and components, Recent economic and financial developments, Regional economic developments JEL Code(s): E, E2, E20, H, H7, I, I1, I18, R, R1

• Concentration in the market of authorized participants of US fixed-income exchange-traded funds

  Staff Analytical Note 2020-27 Rohan Arora, Sébastien Betermier, Guillaume Ouellet Leblanc, Adriano Palumbo, Ryan Shotlander

  We show that a small number of authorized participants (APs) actively create and redeem shares of US-listed fixed-income exchange-traded funds (FI-ETFs). In 2019, three APs performed 82 percent of gross creations and redemptions of FI-ETF shares. In contrast, the group of active APs for equity ETFs was much more diverse.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Coronavirus disease (COVID-19), Financial markets, Financial stability JEL Code(s): G, G1, G2, G20, G23

• Corporate investment and monetary policy transmission in Canada

  Staff Analytical Note 2020-26 Min Jae Kim, Jonathan Witmer

  Unexpected changes in interest rates lead small firms to materially change their investment rate. Large firms, in contrast, show a smaller response. This suggests both that financial conditions are an important channel for transmitting monetary policy and that firm characteristics can help us better understand fluctuations in business investment.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Firm dynamics, Monetary policy, Monetary policy transmission JEL Code(s): D, D2, D22, D9, D92, G, G3, G31, G32

• Potential output in Canada: 2020 reassessment

  Staff Analytical Note 2020-25 Dany Brouillette, Julien Champagne, Julien McDonald-Guimond

  After COVID-19, we expect potential output growth to stabilize around 1.2 percent. This is lower than the 2010–18 average growth of 1.8 percent. Relative to the April 2019 reassessment, the growth profile is revised down. Given the unknown course of the pandemic, uncertainty around these estimates is higher than in previous years.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Labour markets, Potential output, Productivity JEL Code(s): E, E0, E00, E2, E23, E24, E3, E37, E6