Assembling a Real-Financial Micro-Dataset for Canadian Households Staff Working Paper 2010-6 Umar Faruqui The lack of consolidated Canadian micro data on household balance sheets and expenditures has been an important impediment to empirical research into real-financial linkages in the Canadian household sector. Our paper attempts to fill this data gap by merging household balance sheet data from the Canadian Financial Monitor survey with household expenditure data from the Survey of Household Spending. Content Type(s): Staff research, Staff working papers Topic(s): Sectoral balance sheet JEL Code(s): C, C8, C81, D, D1, D10
December 17, 2000 Dynamic General-Equilibrium Models and Why the Bank of Canada is Interested in Them Bank of Canada Review - Winter 2000-2001 Kevin Moran Dynamic general-equilibrium models (DGEMs) are being increasingly used in macroeconomic research. In this article, the author describes the main features of these models and outlines their contribution to economic research performed at the Bank of Canada. He notes that the basic principle of DGEMs is that the modelling of economic activity, even on a scale as large as the economy of a country, should start with a series of microeconomic problems (at the scale of individuals), which, once resolved, are aggregated to represent the macroeconomic reality described by the model. Content Type(s): Publications, Bank of Canada Review articles Topic(s): Economic models
March 16, 2008 Developing a Framework to Assess Financial Stability: Conference Highlights and Lessons Bank of Canada Review - Spring 2008 Olivier de Bandt, Céline Gauthier, Pierre St-Amant Central banks are still defining their approach to financial stability and are at an early stage in the development of useful models. The Bank of Canada's 2007 economic conference was organized to stimulate progress in the development of financial-stability frameworks. Among the highlights reported here are the discussions centred around three proposed frameworks: a contingent-claims-analysis framework, a semi-structural framework, and structural financial-stability models. Participants also reported on their experiences with stress-testing under the International Monetary Fund's Financial Sector Assessment Program and discussed the implications for financial stability of linkages among payment, clearing, and settlement systems. Content Type(s): Publications, Bank of Canada Review articles Topic(s): Financial stability, Financial system regulation and policies, Payment clearing and settlement systems
March 16, 2008 Bank of Canada Review - Spring 2008 Cover Page Canada's First Coinage Photography by Gord Carter, Ottawa. Content Type(s): Publications, Bank of Canada Review
June 17, 2008 A Tool for Assessing Financial Vulnerabilities in the Household Sector Bank of Canada Review - Summer 2008 Shubhasis Dey, Ramdane Djoudad, Yaz Terajima In this article, the authors build on the framework used in the Bank of Canada's Financial System Review to assess the evolution of household indebtedness and financial vulnerabilities in response to changing economic conditions. To achieve this, they first compare two microdata sets generated by Ipsos Reid's Canadian Financial Monitor and Statistics Canada's Survey of Financial Security. They find that the surveys are broadly comparable, despite methodological differences. This enables them to use the combined information content for the identification of the threshold value of the debt-service ratio (DSR). The article then presents an innovative framework that uses household-level microdata to simulate changes in the distribution of the DSR under various stress scenarios. The authors show how this framework can be used by analyzing the effects of two different scenarios on the distribution of the debt-service ratio and the impact on vulnerable households. This tool will enable researchers to refine their analyses of current risks to the financial health of Canadian households. The article concludes with comments on future directions for refining the Bank's analyses of household sector risk. Content Type(s): Publications, Bank of Canada Review articles Topic(s): Econometric and statistical methods, Economic models, Financial stability
August 15, 2000 Restructuring in the Canadian Economy: A Survey of Firms Bank of Canada Review - Summer 2000 Carolyn Kwan Towards the end of the 1980s and into the early 1990s, the Canadian economy experienced a number of structural changes. These included free trade agreements (both the FTA and NAFTA), significant technological advances, deregulation in many sectors of the economy, the arrival of large, U.S.-based retailers, and the introduction of the GST. Content Type(s): Publications, Bank of Canada Review articles Topic(s): Labour markets, Productivity, Regional economic developments
August 16, 2000 The Changing Face of Central Banking in the 1990s Bank of Canada Review - Summer 2000 Graydon Paulin During the 1990s, central banks in the industrialized countries made important changes in the way they operate. As part of these initiatives, central banks have endeavoured to define a set of best practices, learning from each other in the process. The goal was to improve and adapt the frameworks within which monetary policy is implemented. Clarifying Objectives A clear objective is a necessary starting point for any policy framework. The growing consensus that price stability is the most appropriate objective for monetary policy was perhaps one of the most critical developments of the past decade. Price stability is now universally regarded as the key contribution that monetary policy can make to promote sustainable growth and maximize the level of employment. Central banks also need a clear strategy for achieving their objective. A major development of the past decade was the growing popularity of inflation targets as the numerical focus for monetary policy. Clearly defined inflation targets focus policy on the variable that is directly associated with price stability. The Bank of Canada was one of the first to adopt (in 1991) a set of targets for inflation over a specified time horizon. Accountability Many central banks have acquired greater independence and this, together with the public's desire for more information from key public institutions, has raised the standards for accountability. At the same time, explicit targets provide a clear measure against which to judge the performance of the monetary authorities. Increased accountability also has implications for the overall transparency of the monetary authorities. In sum, central banks have become much more open institutions and are placing greater emphasis on their communications activities. As an example, comprehensive inflation reports have become key communications vehicles for a number of central banks. Many of the changes implemented by central banks stem from the desire to improve the credibility of monetary policy, thus making it easier for monetary authorities to achieve their objectives. Although it is difficult to ascertain the overall effect of the evolving policy framework, it is encouraging that inflation and inflation expectations were at low levels at the end of the 1990s, thus providing a solid base for monetary policy in the future. Content Type(s): Publications, Bank of Canada Review articles Topic(s): Credibility, Inflation targets, International topics, Monetary policy framework
April 14, 2006 Trends in Retail Payments and Insights from Public Survey Results Bank of Canada Review - Spring 2006 Varya Taylor While the volume and value of bank notes have continued to increase, the use of cash as a payment method has been affected by the growing use of electronic alternatives. Taylor reports on a 2004 Bank of Canada survey of consumers' payment habits and their perceptions of cash and its alternatives, including their confidence in the security of bank notes. Analysis of the survey results shows that numerous factors affect the demand for bank notes, including income, age, education, gender, the use of debit and credit cards, and the perceived convenience of cash. Taylor also includes a report on the construction of a bank note confidence index that will serve as a benchmark for future surveys. Content Type(s): Publications, Bank of Canada Review articles Topic(s): Bank notes
December 10, 2007 Inflation Targeting, Price-Level Targeting, and Fluctuations in Canada's Terms of Trade Bank of Canada Review - Winter 2007-2008 Donald Coletti, René Lalonde Coletti and Lalonde compare inflation targeting and price-level targeting in the context of a small open economy subject to sizable terms-of-trade shocks. The authors summarize recent research that compares the ability of price-level targeting and inflation targeting to stabilize the macroeconomy when confronted with shocks similar to those experienced by Canada in recent years. Their preliminary results suggest that price-level targeting may represent a feasible alternative to traditional inflation targeting. Their article also provides insight into the direction of current research in this area at the Bank. Content Type(s): Publications, Bank of Canada Review articles Topic(s): Central bank research, Inflation and prices, Monetary policy framework
August 12, 1999 Recent Developments in Global Commodity Prices: Implications for Canada Bank of Canada Review - Summer 1999 Farid Novin, Gerald Stuber The authors examine the recent evolution of commodity prices. They discuss the factors behind the price declines that occurred between the summer of 1997 and the end of 1998, including the key supply factors and the drop in Asian demand caused by that region's concurrent financial and economic crisis. They then review the effects of the reduction in world commodity prices on economic activity in Canada. They point out that the depreciation of the Canadian dollar against the U.S. dollar, together with the continued strength of the U.S. economy, has partly offset the negative effects on Canadian aggregate demand. Content Type(s): Publications, Bank of Canada Review articles Topic(s): Financial markets