C - Mathematical and Quantitative Methods

• Macroeconomic Predictions Using Payments Data and Machine Learning

  Staff Working Paper 2022-10 James Chapman, Ajit Desai

  We demonstrate the usefulness of payment systems data and machine learning models for macroeconomic predictions and provide a set of econometric tools to overcome associated challenges.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Econometric and statistical methods, Payment clearing and settlement systems JEL Code(s): C, C5, C53, C55, E, E3, E37, E4, E42, E5, E52

• Payment Coordination and Liquidity Efficiency in the New Canadian Wholesale Payments System

  Staff Discussion Paper 2022-3 Francisco Rivadeneyra, Nellie Zhang

  We study the impact of the Bank of Canada’s choice of settlement mechanism in Lynx on participant behaviors, liquidity usage, payment delays and the overall operational efficiency of the new system.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Payment clearing and settlement systems JEL Code(s): C, C5, E, E4, E42, E5, E58

• Assessing Climate-Related Financial Risk: Guide to Implementation of Methods

  Technical Report No. 120 Hossein Hosseini Jebeli, Craig Johnston, Craig Logan, Miguel Molico, Xiangjin Shen, Marie-Christine Tremblay

  A pilot project on climate transition scenarios by the Bank of Canada and the Office of the Superintendent of Financial Institutions assessed climate-related credit and market risks. This report describes the project’s methodologies and provides guidance on implementing them.

  Content Type(s): Staff research, Technical reports Topic(s): Climate change, Credit and credit aggregates, Econometric and statistical methods, Financial stability JEL Code(s): C, C5, C53, C8, C83, G, G1, G3, G32

• Transition Scenarios for Analyzing Climate-Related Financial Risk

  Staff Discussion Paper 2022-1 Y.-H. Henry Chen, Erik Ens, Olivier Gervais, Hossein Hosseini Jebeli, Craig Johnston, Serdar Kabaca, Miguel Molico, Sergey Paltsev, Alex Proulx, Argyn Toktamyssov

  Climate transition scenarios clarify climate-related risks to our economy and financial system. This paper summarizes key results of Canada-relevant scenarios developed in a pilot project on climate risk by the Bank of Canada and the Office of the Superintendent of Financial Institutions.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Climate change, Economic models, Financial stability, International topics JEL Code(s): C, C6, C68, D, D5, D58, E, E5, E50, O, O4, O44, P, P1, P18, Q, Q5, Q54

• Business Closures and (Re)Openings in Real Time Using Google Places

  Staff Working Paper 2022-1 Thibaut Duprey, Daniel E. Rigobon, Philip Schnattinger, Artur Kotlicki, Soheil Baharian, T. R. Hurd

  The COVID-19 pandemic highlighted the need for policy-makers to closely monitor disruptions to the retail and food business sectors. We present a new method to measure business opening and closing rates using real-time data from Google Places, the dataset behind the Google Maps service.

  Content Type(s): Staff research, Staff working papers Topic(s): Firm dynamics, Recent economic and financial developments JEL Code(s): C, C5, C55, C8, C81, D, D2, D22, E, E3, E32

• Quantifying the Economic Benefits of Payments Modernization: the Case of the Large-Value Payment System

  Staff Working Paper 2021-64 Neville Arjani, Fuchun Li, Zhentong Lu

  Canada is undertaking a major initiative to modernize its payments ecosystem. The modernized ecosystem is expected to bring significant benefits to Canadian financial markets and the overall economy. We develop an empirical framework to quantify the economic benefits of modernizing the payment system in Canada.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial system regulation and policies, Payment clearing and settlement systems JEL Code(s): C, C3, E, E4, E42, G, G1, G2, G28

• What to Target? Insights from a Lab Experiment

  Staff Working Paper 2021-53 Isabelle Salle

  In a laboratory experiment, we ask participants to predict inflation using three different policy regimes: inflation targeting—with and without greater communication of the target—average inflation targeting and price level targeting. We use participants’ predictions to compare the level and stability of inflation under each regime.

  Content Type(s): Staff research, Staff working papers Topic(s): Inflation targets, Monetary policy communications, Monetary policy framework JEL Code(s): C, C9, C92, E, E3, E31, E5, E52, E7

• Covariates Hiding in the Tails

  Staff Working Paper 2021-45 Milian Bachem, Lerby Ergun, Casper G. de Vries

  We characterize the bias in cross-sectional Hill estimates caused by common underlying factors and propose two simple-to-implement remedies. To test for the presence, direction and size of the bias, we use monthly US stock returns and annual US Census county population data.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods JEL Code(s): C, C0, C01, C1, C14, C5, C58

• Can the characteristics of new mortgages predict borrowers’ financial stress? Insights from the 2014 oil price decline

  Staff Analytical Note 2021-22 Olga Bilyk, Ken Chow, Yang Xu

  We study the relationship between characteristics of new mortgages and borrowers’ financial stress in Canada’s energy-intensive regions following the 2014 collapse in oil prices. We find that borrowers with limited home equity were more likely to have difficulty repaying debt.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Credit and credit aggregates, Econometric and statistical methods, Financial stability, Housing JEL Code(s): C, C2, C25, D, D1, D14, G, G2, G21, G5, G51, R, R2, R21

• Rising US LNG Exports and Global Natural Gas Price Convergence

  Staff Discussion Paper 2021-14 Robert Ialenti

  We assess how rising exports of US liquefied natural gas affect the convergence of natural gas prices worldwide. Our results may have implications for the development of future LNG export capacity in Canada.

  Content Type(s): Staff research, Staff discussion papers Topic(s): International topics, Market structure and pricing JEL Code(s): C, C3, C32, F, F1, F15, K, K4, K41, L, L9, L95