Staff analytical notes are short articles that focus on topical issues relevant to the current economic and financial context.
225
result(s)
Borrowing Costs for Government of Canada Treasury Bills
Staff Analytical Note 2019-28
Jabir Sandhu,
Adrian Walton,
Jessica Lee
The cost of borrowing Government of Canada treasury bills (t-bills) in the repurchase (repo) market is mainly explained by the relationship between the parties involved. Some pairs of parties conduct most of their repos for t-bills rather than bonds, and at relatively high borrowing costs. We speculate that these pairs have formed a mutually beneficial service relationship in which one party consistently receives t-bills, while the other receives cash at a relatively cheap rate.
Content Type(s):
Staff research,
Staff analytical notes
Topic(s):
Financial markets
JEL Code(s):
G,
G1,
G10,
G11,
G12,
G2,
G20,
G21,
G23,
G3,
G32
Home Equity Extraction and Household Spending in Canada
Staff Analytical Note 2019-27
Anson T. Y. Ho,
Mikael Khan,
Monica Mow,
Brian Peterson
We use rich microdata to measure home equity extraction in Canada and track its evolution over time. We find home equity extraction has been rising in recent years and has likely contributed materially to dynamics in household spending.
Content Type(s):
Staff research,
Staff analytical notes
Topic(s):
Financial stability,
Housing
JEL Code(s):
D,
D1,
D12,
E,
E2,
E21,
G,
G2,
G20
Bridging Canadian Business Lending and Market-Based Risk Measures
Staff Analytical Note 2019-26
Guillaume Ouellet Leblanc,
Maxime Leboeuf
Lending to business is central to economic growth because it supports investment by firms. Knowing how market participants view risk in the financial system can give the Bank of Canada information about future growth in business loans. In this note, we look at three market-based risk measures and find that sudden increases in the perception of risk in the Canadian banking system are associated with a weaker outlook for business loans and real gross domestic product.
Content Type(s):
Staff research,
Staff analytical notes
Topic(s):
Business fluctuations and cycles,
Financial markets
JEL Code(s):
E,
E3,
E32,
E4,
E44,
G,
G1,
G12
Using Exchange-Traded Funds to Measure Liquidity in the Canadian Corporate Bond Market
Staff Analytical Note 2019-25
Rohan Arora,
Guillaume Ouellet Leblanc,
Jabir Sandhu,
Jun Yang
We introduce a new proxy for measuring corporate bond liquidity, using the price of exchange-traded funds (ETFs) that hold corporate bonds. It measures the average liquidity across 900 corporate bonds every day, many more than other proxies used in previous Bank of Canada analysis. The new proxy nonetheless paints a very similar picture of liquidity conditions and confirms the previous findings: the liquidity of bonds has generally improved since 2010.
Content Type(s):
Staff research,
Staff analytical notes
Topic(s):
Financial markets
JEL Code(s):
G,
G1,
G12,
G14
The Formation of House Price Expectations in Canada: Evidence from a Randomized Information Experiment
Staff Analytical Note 2019-24
Marc-André Gosselin,
Mikael Khan,
Matthieu Verstraete
We conduct a randomized information experiment leveraging the Canadian Survey of Consumer Expectations. We provide causal evidence that respondents revise both their short- and medium-term expectations of future house price growth in a way that is consistent with observed short-term momentum in house prices. However, empirically, house price growth tends to revert to its mean in the medium term.
Content Type(s):
Staff research,
Staff analytical notes
Topic(s):
Financial stability,
Housing
JEL Code(s):
C,
C9,
D,
D8,
D84,
R,
R2,
R21
Relative Value of Government of Canada Bonds
Staff Analytical Note 2019-23
Jean-Sébastien Fontaine,
Jabir Sandhu,
Adrian Walton
Government of Canada bonds in circulation that promise very similar payoffs can have different prices. We study the reason for these differences. Bonds that trade more often and earn high rental income in the repurchase agreement (repo) market tend to have higher prices. Bonds with longer tenors and times to maturity tend to have lower prices. This contrast between cheap and expensive bonds is important because trading volume and rental income can change rapidly, unlike tenor and time to maturity, which are stable.
Content Type(s):
Staff research,
Staff analytical notes
Topic(s):
Financial markets
JEL Code(s):
G,
G1,
G10,
G11,
G12,
G2,
G23,
G3,
G32
Explaining Unusual Cash Patterns in 2018
Staff Analytical Note 2019-22
Walter Engert,
Ben Fung,
Jozsef Molnar,
Gradon Nicholls
There was an unusually large decline of bank notes in circulation in October 2018. Some have argued that this was due to the legalization of cannabis in Canada in mid-October.
Content Type(s):
Staff research,
Staff analytical notes
Topic(s):
Bank notes,
Digital currencies and fintech,
Financial services
JEL Code(s):
E,
E4,
E41,
E42,
E5,
E58
The Effects of Inflation Targeting for Financial Development
Staff Analytical Note 2019-21
Geoffrey R. Dunbar,
Amy (Qijia) Li
The adoption of inflation targeting (IT) by central banks leads to an increase of 10 to 20 percent in measures of financial development, with a lag. We also find evidence that the financial sector benefits of IT adoption were higher for early-adopting central banks.
Content Type(s):
Staff research,
Staff analytical notes
Topic(s):
Financial institutions,
Inflation targets,
Monetary policy transmission
JEL Code(s):
E,
E4,
E44,
E5,
E58
The Impact of a Trade War: Assessment of the Current Tariffs and Alternative Scenarios
Staff Analytical Note 2019-20
Karyne B. Charbonneau
This note uses Charbonneau and Landry’s (2018) framework to assess the direct impact of the current trade tensions on the Canadian and global economies, as well as possible implications if the conflict escalates further. Overall, my findings show that the estimated impact of current tariffs on real gross domestic product (GDP) remains relatively small, which is in line with the literature on gains from trade, but the impact on trade is much larger.
Content Type(s):
Staff research,
Staff analytical notes
Topic(s):
Recent economic and financial developments,
Trade integration
JEL Code(s):
F,
F1,
F11,
F13,
F14,
F15,
F5,
F50,
F6,
F62,
F68