D - Microeconomics

• A Reference Guide for the Business Outlook Survey

  Staff Discussion Paper 2020-15 David Amirault, Naveen Rai, Laurent Martin

  The Business Outlook Survey (BOS) has become an important part of monetary policy deliberations at the Bank of Canada and is also well known in Canadian policy and financial circles. This paper compiles more than 20 years of experience conducting the BOS and serves as a comprehensive reference manual.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Firm dynamics, Regional economic developments JEL Code(s): C, C8, C83, D, D2, D22, E, E3, E32

• Strategic Uncertainty in Financial Markets: Evidence from a Consensus Pricing Service

  Staff Working Paper 2020-55 Lerby Ergun, Andreas Uthemann

  We look at the informational content of consensus pricing in opaque over-the-counter markets. We show that the availability of price data informs participants mainly about other participants’ valuations, rather than about the value of a financial security.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial markets, Market structure and pricing JEL Code(s): C, C5, C58, D, D5, D53, D8, D83, G, G1, G12, G14

• Towards a HANK Model for Canada: Estimating a Canadian Income Process

  Staff Discussion Paper 2020-13 Iskander Karibzhanov

  How might one simulate a million realistic income paths and compute their statistical moments in under a second? Using CUDA-based methods to estimate the Canadian earnings process, I find that the distribution of labour income growth is sharply peaked with heavy tails—similar to that in the United States.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Economic models, Labour markets JEL Code(s): D, D3, D31, E, E2, E24, J, J3, J31

• The Determinants of Consumers’ Inflation Expectations: Evidence from the US and Canada

  Staff Working Paper 2020-52 Charles Bellemare, Rolande Kpekou Tossou, Kevin Moran

  We compare the determinants of consumer inflation expectations in the US and Canada by analyzing two current surveys. We find that Canadian consumers rely more on professional forecasts and the history of actual inflation when forming their expectations, while US consumers rely more on their own lagged expectations.

  Content Type(s): Staff research, Staff working papers Topic(s): Central bank research, Econometric and statistical methods, Inflation and prices, Inflation targets JEL Code(s): C, C3, C33, D, D8, D83, D84, E, E3, E31

• 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

• Production Networks and the Propagation of Commodity Price Shocks

  Staff Working Paper 2020-44 Shutao Cao, Wei Dong

  We examine the macro implications of commodity price shocks in a model with multiple production sectors that are interconnected within a commodity-exporting small open economy.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, International topics JEL Code(s): D, D5, D57, F, F4, F41

• Outside Investor Access to Top Management: Market Monitoring versus Stock Price Manipulation

  Staff Working Paper 2020-43 Josef Schroth

  Should managers be paid in stock options if they provide stock-market participants with information about the firm? This paper studies how firm owners trade off the benefit of stock-price incentives and better-informed market participants against the cost of potential stock-price manipulation.

  Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Financial markets, Recent economic and financial developments JEL Code(s): D, D8, D82, D86, G, G1, G14, G3, G32, G34, M, M1, M12, M4, M41

• Forward Guidance and Expectation Formation: A Narrative Approach

  Staff Working Paper 2020-40 Christopher S. Sutherland

  How exactly does forward guidance influence interest rate expectations?

  Content Type(s): Staff research, Staff working papers Topic(s): Central bank research, Monetary policy, Monetary policy communications, Monetary policy transmission JEL Code(s): D, D8, D83, D84, E, E3, E37, E5, E52, E58

• Child Skill Production: Accounting for Parental and Market-Based Time and Goods Investments

  Staff Working Paper 2020-36 Elizabeth Caucutt, Lance Lochner, Joseph Mullins, Youngmin Park

  Can daycare replace parents’ time spent with children? We explore this by using data on how parents spend time and money on children and how this spending is related to their child’s development.

  Content Type(s): Staff research, Staff working papers Topic(s): Fiscal policy, Labour markets, Potential output, Productivity JEL Code(s): D, D1, D13, H, H3, H31, J, J2, J22, J24

• What do high-frequency expenditure network data reveal about spending and inflation during COVID‑19?

  Staff Analytical Note 2020-20 Kim Huynh, Helen Lao, Patrick Sabourin, Angelika Welte

  The official consumer price index (CPI) inflation measure, based on a fixed basket set before the COVID 19 pandemic, may not fully reflect what consumers are currently experiencing. We partnered with Statistics Canada to construct a more representative index for the pandemic with weights based on real-time transaction and survey data.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Inflation and prices, Payment clearing and settlement systems JEL Code(s): D, D1, D12, E, E3, E31, E4, E42, E5, E52