Expenditure-Switching Effect and the Choice of Exchange Rate Regime Staff Working Paper 2007-54 Wei Dong The author investigates the quantitative importance of the expenditure-switching effect by developing and estimating a structural sticky-price model nesting both producer currency pricing (PCP) and local currency pricing (LCP) settings. Content Type(s): Staff research, Staff working papers Research Topic(s): Exchange rate regimes, International topics JEL Code(s): F, F3, F4
Occasionally Binding Constraints in Large Models: A Review of Solution Methods Staff Discussion Paper 2021-5 Jonathan Swarbrick Solving macroeconomic models is difficult. One challenge is the occasionally binding constraint of the zero lower bound on nominal interest rates. This paper reviews various ways to solve models that include this feature. Content Type(s): Staff research, Staff discussion papers Research Topic(s): Business fluctuations and cycles, Economic models JEL Code(s): C, C6
Real Exchange Rate Persistence in Dynamic General-Equilibrium Sticky-Price Models: An Analytical Characterization Staff Working Paper 2003-35 Hafedh Bouakez This paper assesses analytically the ability of dynamic general-equilibrium sticky-price models to generate persistent real exchange rate fluctuations. It develops a tractable general-equilibrium model with Calvo-type price stickiness. Content Type(s): Staff research, Staff working papers Research Topic(s): Economic models, Exchange rates, International topics JEL Code(s): F, F3, F31, F4, F41
Human Capital Risk and the Firmsize Wage Premium Staff Working Paper 2008-33 Danny Leung, Alexander Ueberfeldt Why do employed persons in large firms earn more than employed persons in small firms, even after controlling for observable characteristics? Complementary to previous results, this paper proposes a mechanism that gives an answer to this question. Content Type(s): Staff research, Staff working papers Research Topic(s): Economic models, Labour markets, Productivity JEL Code(s): J, J2, J24, J3, J31
May 11, 2017 The Life Cycle of Government of Canada Bonds in Core Funding Markets Bank of Canada Review - Spring 2017 Narayan Bulusu, Sermin Gungor Data on the use of government securities in the repo, securities lending and cash markets suggest there are bond market clienteles in Canada. Shorter-term bonds are more prevalent in the repo market, while longer-maturity securities are more active in the securities lending market—consistent with the preferred habitat hypothesis. These results could help design better debt-management strategies and more-effective policies to maintain well-functioning financial markets. Content Type(s): Publications, Bank of Canada Review articles Research Topic(s): Debt management, Financial markets JEL Code(s): G, G1, G12, G2, G23
Central Bank Digital Currency: Motivations and Implications Staff Discussion Paper 2017-16 Walter Engert, Ben Fung The emergence of digital currencies such as Bitcoin and the underlying blockchain and distribution ledger technology have attracted significant attention. These developments have raised the possibility of considerable impacts on the financial system and perhaps the wider economy. Content Type(s): Staff research, Staff discussion papers Research Topic(s): Bank notes, Digital currencies and fintech, Financial services, Payment clearing and settlement systems JEL Code(s): E, E4, E41, E42, E5
Analyzing and Forecasting the Canadian Economy through the LENS Model Technical Report No. 102 Olivier Gervais, Marc-André Gosselin The authors describe the key features of a new large-scale Canadian macroeconomic forecasting model developed over the past two years at the Bank of Canada. Content Type(s): Staff research, Technical reports Research Topic(s): Econometric and statistical methods, Economic models JEL Code(s): C, C5, C53, E, E1, E17, E2, E27, E3, E37, F, F1, F17
Eggs in One Basket: Security and Convenience of Digital Currencies Staff Working Paper 2021-6 Charles M. Kahn, Francisco Rivadeneyra, Tsz-Nga Wong Digital currencies store balances in anonymous electronic addresses. This paper analyzes the trade-offs between the safety and convenience of aggregating balances in addresses, electronic wallets and banks. Content Type(s): Staff research, Staff working papers Research Topic(s): Central bank research, Digital currencies and fintech, Financial services, Payment clearing and settlement systems JEL Code(s): E, E4, E42, E5, E51, E58
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 Research 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
Harnessing the benefit of state-contingent forward guidance Staff Analytical Note 2022-13 Vivian Chu, Yang Zhang A low level of the neutral rate of interest increases the likelihood that a central bank’s policy rate will reach its effective lower bound (ELB) in future economic downturns. In a low neutral rate environment, using an extended monetary policy toolkit including forward guidance helps address the ELB challenge. Using the Bank’s Terms-of-Trade Economic Model, we assess the benefits and limitations of a state-contingent forward guidance implemented within a flexible inflation targeting framework. Content Type(s): Staff research, Staff analytical notes Research Topic(s): Central bank research, Economic models, Monetary policy framework, Monetary policy transmission JEL Code(s): E, E2, E27, E3, E37, E4, E5, E52, E58