E - Macroeconomics and Monetary Economics

• Narrative-Driven Fluctuations in Sentiment: Evidence Linking Traditional and Social Media

  Staff Working Paper 2023-23 Alistair Macaulay, Wenting Song

  News media present competing interpretations of what breaking news implies for the macroeconomy. Recent examples include news reporting on high inflation and yield curve inversions. Do these narratives shape macroeconomic sentiment? In this paper, we highlight the importance of narratives using evidence linking traditional media and social media.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial markets, Inflation and prices, Monetary policy JEL Code(s): D, D8, D84, E, E3, E32, E4, E43, E44, E5, G, G1

• The Impact of Unemployment Insurance and Unsecured Credit on Business Cycles

  Staff Working Paper 2023-22 Michael Irwin

  This paper studies how unsecured consumer credit impacts the extent to which unemployment insurance (UI) policies smooth aggregate consumption fluctuations over the business cycle. Using a general equilibrium real business cycle model, I find that unsecured credit amplifies the extent to which UI smooths cyclical consumption fluctuations.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Credit and credit aggregates, Economic models, Fiscal policy, Labour markets JEL Code(s): E, E2, E21, E24, E3, E32, E4, E44, E6, E62

• Demographic Origins of the Decline in Labor’s Share

  Staff Working Paper 2023-20 Andrew Glover, Jacob Short

  Declining labour market dynamism of workers results in an increasing wedge between their earnings and their marginal product as they age. This wedge and the demographic shift in the earnings shares of older workers can account for 59% of the decline in labor’s share of earnings in the United States.

  Content Type(s): Staff research, Staff working papers Topic(s): Labour markets, Productivity JEL Code(s): D, D3, D33, E, E2, E25, J, J1, J3, J6, J62

• Turning Words into Numbers: Measuring News Media Coverage of Shortages

  Staff Discussion Paper 2023-8 Lin Chen, Stephanie Houle

  We develop high-frequency, news-based indicators using natural language processing methods to analyze news media texts. Our indicators track both supply (raw, intermediate and final goods) and labour shortages over time. They also provide weekly time-varying topic narratives about various types of shortages.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Coronavirus disease (COVID-19), Econometric and statistical methods, Monetary policy and uncertainty, Recent economic and financial developments JEL Code(s): C, C5, C55, C8, C82, E, E3, E37

• What Consistent Responses on Future Inflation by Consumers Can Reveal

  Staff Discussion Paper 2023-7 Sarah Miller, Patrick Sabourin

  We analyze factors that may explain consistent answers to questions about inflation expectations in the Canadian Survey of Consumer Expectations. We also compare the inflation forecasts of consumers with consistent responses with those of professional forecasters.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Central bank research, Inflation and prices JEL Code(s): D, D8, D80, D84, E, E3, E31

• Supply Drivers of US Inflation Since the COVID-19 Pandemic

  Staff Working Paper 2023-19 Serdar Kabaca, Kerem Tuzcuoglu

  This paper examines the contribution of several supply factors to US headline inflation since the start of the COVID-19 pandemic. We identify six supply shocks using a structural VAR model: labor supply, labor productivity, global supply chain, oil price, price mark-up and wage mark-up shocks.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Econometric and statistical methods, Inflation and prices JEL Code(s): C, C3, C32, E, E3, E31, E32

• Central Bank Forecasting: A Survey

  Staff Working Paper 2023-18 Carola Conces Binder, Rodrigo Sekkel

  We review the literature on central bank forecasting with a special focus on the Federal Reserve, European Central Bank, Bank of England and Bank of Canada.

  Content Type(s): Staff research, Staff working papers Topic(s): Monetary policy JEL Code(s): E, E4, E47, E5, E52, E58

• A Review of the Bank of Canada’s Market Operations Related to COVID-19

  Staff Discussion Paper 2023-6 Grahame Johnson

  This paper reviews the range of extraordinary programs launched by the Bank of Canada in response to the pandemic-related financial market disruption. It provides some recommendations for future interventions to ensure the programs are appropriately structured for the financial and economic stresses they are intended to address.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Coronavirus disease (COVID-19), Financial markets, Financial stability JEL Code(s): D, D4, D47, E, E4, E41, E5, G, G0, G01, G1, G14, G2, G21, G23, H, H1, H12

• Persistent Debt and Business Cycles in an Economy with Production Heterogeneity

  Staff Working Paper 2023-17 Aubhik Khan, Soyoung Lee

  We examine the role of debt in amplifying and propagating recessions. Firms’ debt adjustment makes recessions deeper but makes expansions gradual. In particular, when the aggregate business leverage is ten percentage points above average, the half-life of the recovery doubles.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Firm dynamics, Productivity JEL Code(s): E, E2, E23, E3, E30, E32

• Firms’ inflation expectations and price-setting behaviour in Canada: Evidence from a business survey

  Staff Analytical Note 2023-3 Ramisha Asghar, James Fudurich, Jane Voll

  Canadian firms’ expectations for high inflation may be influencing their price setting, supporting strong price growth and delays in the transmission of monetary policy. Using data from the Business Outlook Survey, we investigate the reasons behind widespread price growth seen in Canada in 2021 and early 2022.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Firm dynamics, Inflation and prices, Monetary policy transmission, Recent economic and financial developments JEL Code(s): D, D2, D22, E, E3, E31