The Complex Adjustment of the Canadian Economy to Lower Commodity Prices Staff Analytical Note 2016-1 Julien Champagne, Nikita Perevalov, Hope Pioro, Dany Brouillette, Andrew Agopsowicz In this analytical note, we provide a comprehensive assessment of the complex structural adjustment facing the Canadian economy following the commodity price decline since mid-2014. We quantify separately the impacts coming from the commodity sector restructuring and the broader effect of significantly lower terms of trade. Content Type(s): Staff research, Staff analytical notes Topic(s): Business fluctuations and cycles, Exchange rates, Labour markets, Potential output, Recent economic and financial developments JEL Code(s): E, E1, E17, E2, E27, E5, E52, J, J2, Q, Q0, Q00
December 31, 2015 Research Update - December 2015 This monthly newsletter features the latest research publications by Bank of Canada economists including external publications and working papers published on the Bank of Canada’s website. Content Type(s): Staff research, Research newsletters
Debt Overhang and Deleveraging in the US Household Sector: Gauging the Impact on Consumption Staff Working Paper 2015-47 Bruno Albuquerque, Georgi Krustev Using a novel dataset for the US states, this paper examines whether household debt and the protracted debt deleveraging help explain the dismal performance of US consumption since 2007, in the aftermath of the housing bubble. Content Type(s): Staff research, Staff working papers Topic(s): Credit and credit aggregates, Econometric and statistical methods, International topics JEL Code(s): C, C1, C13, C2, C23, C5, C52, D, D1, D12, H, H3, H31
Credit Cards: Disentangling the Dual Use of Borrowing and Spending Staff Analytical Note 2015-3 Olga Bilyk, Brian Peterson Over the past 15 years, aggregate credit card balances have been increasing, except for a brief spell in the aftermath of the 2007–09 financial crisis. Determining whether the growing balances are due to increased usage of credit cards as a method of payment or whether they reflect increased short-term borrowing is challenging because aggregate balances are snapshots of charges on credit cards before households make their monthly payments. Content Type(s): Staff research, Staff analytical notes Topic(s): Credit and credit aggregates, Financial stability
Tractable Term Structure Models Staff Working Paper 2015-46 Bruno Feunou, Jean-Sébastien Fontaine, Anh Le, Christian Lundblad We introduce a new framework that facilitates term structure modeling with both positive interest rates and flexible time-series dynamics but that is also tractable, meaning amenable to quick and robust estimation. Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Interest rates, International financial markets, International topics, Monetary policy and uncertainty, Monetary policy transmission JEL Code(s): G, G1, G12
Estimating Canada’s Effective Lower Bound Staff Analytical Note 2015-2 Jonathan Witmer, Jing Yang In 2009, the Bank of Canada set its effective lower bound (ELB) at 25 basis points (bps). Given the recent experience of Sweden, Denmark, Switzerland and the euro area with negative interest rates, we examine the economics of negative interest rates and suggest that cash storage costs are the source of a negative lower bound on interest rates. Content Type(s): Staff research, Staff analytical notes Topic(s): Central bank research, Monetary policy framework, Monetary policy implementation JEL Code(s): D, D5, D53, E, E4, E41, E43, E5, E58
Exchange Rate Fluctuations and Labour Market Adjustments in Canadian Manufacturing Industries Staff Working Paper 2015-45 Gabriel Bruneau, Kevin Moran We estimate the link between exchange rate fluctuations and the labour input of Canadian manufacturing industries. The analysis is based on a dynamic model of labour demand, and the econometric strategy employs a panel two-step approach for cointegrating regressions. Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Exchange rate regimes, Exchange rates, Labour markets, Recent economic and financial developments JEL Code(s): E, E2, E24, F, F1, F14, F16, F3, F31, F4, F41, J, J2, J23
Emergency Liquidity Facilities, Signalling and Funding Costs Staff Working Paper 2015-44 Céline Gauthier, Alfred Lehar, Héctor Pérez Saiz, Moez Souissi In the months preceding the failure of Lehman Brothers in September 2008, banks were willing to pay a premium over the Federal Reserve’s discount window (DW) rate to participate in the much less flexible Term Auction Facility (TAF). We empirically test the predictions of a new signalling model that offers a rationale for offering two different liquidity facilities. Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial stability, Lender of last resort JEL Code(s): G, G0, G01, G2, G21, G28
November 30, 2015 Research Update - November 2015 This monthly newsletter features the latest research publications by Bank of Canada economists including external publications and working papers published on the Bank of Canada’s website. Content Type(s): Staff research, Research newsletters
On the Essentiality of E-Money Staff Working Paper 2015-43 Jonathan Chiu, Tsz-Nga Wong Recent years have witnessed the advances of e-money systems such as Bitcoin, PayPal and various forms of stored-value cards. This paper adopts a mechanism design approach to identify some essential features of different payment systems that implement and improve the constrained optimal resource allocation. Content Type(s): Staff research, Staff working papers Topic(s): Bank notes, Digital currencies and fintech, Payment clearing and settlement systems JEL Code(s): E, E4, E42, E5, E58, L, L5, L51