C1 - Econometric and Statistical Methods and Methodology: General

• Decision Synthesis in Monetary Policy

  Staff Working Paper 2024-30 Tony Chernis, Gary Koop, Emily Tallman, Mike West

  We use Bayesian predictive decision synthesis to formalize monetary policy decision-making. We develop a case-study of monetary policy decision-making of an inflation-targeting central bank using multiple models in a manner that considers decision goals, expectations and outcomes.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Economic models, Monetary policy JEL Code(s): C, C1, C11, C3, C32, C5, C53

• Non-Parametric Identification and Testing of Quantal Response Equilibrium

  Staff Working Paper 2024-24 Johannes Hoelzemann, Ryan Webb, Erhao Xie

  We show that the utility function and the error distribution are non-parametrically over-identified under Quantal Response Equilibrium (QRE). This leads to a simple test for QRE. We illustrate our method in a Monte Carlo exercise and a laboratory experiment.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Economic models JEL Code(s): C, C1, C14, C5, C57, C9, C92

• Parallel Tempering for DSGE Estimation

  Staff Working Paper 2024-13 Joshua Brault

  I develop a population-based Markov chain Monte Carlo algorithm known as parallel tempering to estimate dynamic stochastic general equilibrium models. Parallel tempering approximates the posterior distribution of interest using a family of Markov chains with tempered posteriors.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Economic models JEL Code(s): C, C1, C11, C15, E, E1, E10

• Predictive Density Combination Using a Tree-Based Synthesis Function

  Staff Working Paper 2023-61 Tony Chernis, Niko Hauzenberger, Florian Huber, Gary Koop, James Mitchell

  This paper studies non-parametric combinations of density forecasts. We introduce a regression tree-based approach that allows combination weights to vary on the features of the densities, time-trends or economic indicators. In two empirical applications, we show the benefits of this approach in terms of improved forecast accuracy and interpretability.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods JEL Code(s): C, C1, C11, C3, C32, C5, C53

• Three things we learned about the Lynx payment system

  Staff Analytical Note 2023-14 Nikil Chande, Zhentong Lu, Hiru Rodrigo, Phoebe Tian

  Canada transitioned to a new wholesale payment system, Lynx, in August 2021. Lynx is based on a real-time settlement model that eliminates credit risk in the system. This model can require more liquidity; however, Lynx’s design allows Canada’s wholesale payments to settle efficiently.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Financial institutions, Financial services, Financial system regulation and policies, Payment clearing and settlement systems JEL Code(s): C, C1, C10, E, E4, E42, G, G2, G28

• Combining Large Numbers of Density Predictions with Bayesian Predictive Synthesis

  Staff Working Paper 2023-45 Tony Chernis

  I show how to combine large numbers of forecasts using several approaches within the framework of a Bayesian predictive synthesis. I find techniques that choose and combine a handful of forecasts, known as global-local shrinkage priors, perform best.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods JEL Code(s): C, C1, C11, C5, C52, C53, E, E3, E37

• Unmet Payment Needs and a Central Bank Digital Currency

  Staff Discussion Paper 2023-15 Christopher Henry, Walter Engert, Alexandra Sutton-Lalani, Sebastian Hernandez, Darcey McVanel, Kim Huynh

  We discuss the payment habits of Canadians both in the current payment environment and in a hypothetical cashless environment.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Bank notes, Central bank research, Digital currencies and fintech, Financial services JEL Code(s): C, C1, C12, C9, E, E4, O, O5, O54

• Global Demand and Supply Sentiment: Evidence from Earnings Calls

  Staff Working Paper 2023-37 Temel Taskin, Franz Ulrich Ruch

  This paper quantifies global demand, supply and uncertainty shocks and compares two major global recessions: the 2008–09 Great Recession and the COVID-19 pandemic. We use two alternate approaches to decompose economic shocks: text mining techniques on earnings calls transcripts and a structural Bayesian vector autoregression model.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Coronavirus disease (COVID-19), Econometric and statistical methods, Inflation and prices, International topics JEL Code(s): C, C1, C11, C3, C32, E, E3, E32, G, G1, G10

• What Can Earnings Calls Tell Us About the Output Gap and Inflation in Canada?

  Staff Discussion Paper 2023-13 Marc-André Gosselin, Temel Taskin

  We construct new indicators of demand and supply for the Canadian economy by using natural language processing techniques to analyze earnings calls of publicly listed firms. Our results indicate that the new indicators could help central banks identify inflationary pressures in real time.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Central bank research, Domestic demand and components, Econometric and statistical methods, Inflation and prices, Potential output JEL Code(s): C, C1, C3, E, E3, E5

• From LVTS to Lynx: Quantitative Assessment of Payment System Transition

  Staff Working Paper 2023-24 Ajit Desai, Zhentong Lu, Hiru Rodrigo, Jacob Sharples, Phoebe Tian, Nellie Zhang

  We quantitatively assess the changes in participants’ payment behaviour from modernizing Canada's high-value payments system to Lynx. Our analysis suggests that Lynx's liquidity-saving mechanism encourages liquidity pooling and early payments submission, resulting in improved efficiency for participants but with slightly increased payment delays.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial services, Financial system regulation and policies, Payment clearing and settlement systems JEL Code(s): C, C1, C10, E, E4, E42, G, G2, G28