November 17, 2011 Bank of Canada Review - Autumn 2011 This issue features four articles that present research and analysis by Bank staff. The first focuses on reforming the international monetary system; the second on the role of collateral and haircut policy in central bank lending; and the third on the extraction of information from the Business Outlook Survey using principal-component analysis. The fourth reviews studies that model the counterfeiting of bank notes. Content Type(s): Publications, Bank of Canada Review
Flight from Safety: How a Change to the Deposit Insurance Limit Affects Households’ Portfolio Allocation Staff Working Paper 2019-29 H. Evren Damar, Reint Gropp, Adi Mordel Deposit insurance protects depositors from failing banks, thus making insured deposits risk-free. When a deposit insurance limit is increased, some deposits that previously were uninsured become insured, thereby increasing the share of risk-free assets in households’ portfolios. This increase cannot simply be undone by households, because to invest in uninsured deposits, a household must first invest in insured deposits up to the limit. This basic insight is the starting point of the analysis in this paper. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial institutions, Financial system regulation and policies JEL Code(s): D, D1, D14, G, G2, G21, G28, L, L5, L51
Optimization in a Simulation Setting: Use of Function Approximation in Debt Strategy Analysis Staff Working Paper 2007-13 David Bolder, Tiago Rubin The stochastic simulation model suggested by Bolder (2003) for the analysis of the federal government's debt-management strategy provides a wide variety of useful information. It does not, however, assist in determining an optimal debt-management strategy for the government in its current form. Content Type(s): Staff research, Staff working papers Research Topic(s): Debt management, Econometric and statistical methods, Financial markets, Fiscal policy JEL Code(s): C, C0, C1, C14, C15, C5, C51, C52, C6, C61, C65, E, E6, G, G1, H, H6, H63
Nowcasting Canadian Economic Activity in an Uncertain Environment Staff Discussion Paper 2018-9 Tony Chernis, Rodrigo Sekkel This paper studies short-term forecasting of Canadian real GDP and its expenditure components using combinations of nowcasts from different models. Starting with a medium-sized data set, we use a suite of common nowcasting tools for quarterly real GDP and its expenditure components. Content Type(s): Staff research, Staff discussion papers Research Topic(s): Econometric and statistical methods JEL Code(s): C, C5, C53, E, E3, E37, E5, E52
Asking About Wages: Results from the Bank of Canada’s Wage Setting Survey of Canadian Companies Staff Discussion Paper 2013-1 David Amirault, Paul Fenton, Thérèse Laflèche The Bank of Canada conducted a Wage Setting Survey with a sample of 200 private sector firms from mid-October 2007 to May 2008. Results indicate that wage adjustments for the Canadian non-union private workforce are overwhelmingly time dependent, with a fixed duration of one year, and are clustered in the first four months of the year, suggesting that wage stickiness may not be constant over the year. Content Type(s): Staff research, Staff discussion papers Research Topic(s): Labour markets, Monetary policy transmission JEL Code(s): E, E2, E24, J, J3, J33, M, M5, M52
Understanding Post-COVID Inflation Dynamics Staff Working Paper 2022-50 Martin Harding, Jesper Lindé, Mathias Trabandt We propose a macroeconomic model with a nonlinear Phillips curve that has a flat slope when inflationary pressures are subdued and steepens when inflationary pressures are elevated. Our model can generate more sizable inflation surges due to cost-push and demand shocks than a standard linearized model when inflation is high. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Central bank research, Coronavirus disease (COVID-19), Economic models, Inflation and prices, Inflation: costs and benefits, Monetary policy, Monetary policy implementation JEL Code(s): E, E3, E30, E31, E32, E37, E4, E44, E5, E52
Gazing at r-star: A Hysteresis Perspective Staff Working Paper 2023-5 Paul Beaudry, Katya Kartashova, Césaire Meh Many explanations for the decline in real interest rates over the last 30 years point to the role that population aging or rising income inequality plays in increasing the long-run aggregate demand for assets. Notwithstanding the importance of such factors, the starting point of this paper is to show that the major change driving household asset demand over this period is instead an increased desire—for a given age and income level—to hold assets. Content Type(s): Staff research, Staff working papers Research Topic(s): Economic models, Fiscal policy, Inflation and prices, Inflation targets, Interest rates, Monetary policy, Monetary policy framework JEL Code(s): E, E2, E21, E3, E31, E4, E43, E5, E52, E58, E6, E62, G, G5, G51, H, H6
Dating Systemic Financial Stress Episodes in the EU Countries Staff Working Paper 2016-11 Benjamin Klaus, Tuomas Peltonen, Thibaut Duprey This paper introduces a new methodology to date systemic financial stress events in a transparent, objective and reproducible way. The financial cycle is captured by a monthly country-specific financial stress index. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Central bank research, Econometric and statistical methods, Economic models, Financial markets, Financial stability, Financial system regulation and policies, Monetary and financial indicators JEL Code(s): C, C5, C54, G, G0, G01, G1, G15
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 Research Topic(s): Central bank research, Inflation and prices, Monetary policy framework
Stagflation and Topsy-Turvy Capital Flows Staff Working Paper 2022-46 Julien Bengui, Louphou Coulibaly Unregulated capital flows are likely excessive during a stagflation episode, owing to a macroeconomic externality operating through the economy’s supply side. Inflows raise domestic wages and cause unwelcome upward pressure on firm costs, yet market forces likely generate such inflows. Optimal capital flow management instead requires net outflows. Content Type(s): Staff research, Staff working papers Research Topic(s): Inflation and prices, International financial markets, International topics, Monetary policy JEL Code(s): D, D6, D62, E, E5, E52, F, F3, F32, F38, F4, F41