An Alternative Estimate of Canadian Potential Output: The Multivariate State-Space Framework Staff discussion paper 2018-14 Lise Pichette, Maria Bernier, Marie-Noëlle Robitaille In this paper, we extend the state-space methodology proposed by Blagrave et al. (2015) and decompose Canadian potential output into trend labour productivity and trend labour input. As in Blagrave et al. (2015), we include output growth and inflation expectations from consensus forecasts to help refine our estimates. Content Type(s): Staff research, Staff discussion papers JEL Code(s): C, C5, E, E0, E5 Research Theme(s): Models and tools, Economic models, Monetary policy, Real economy and forecasting
Discount Rates, Debt Maturity, and the Fiscal Theory Staff working paper 2021-58 Alexandre Corhay, Thilo Kind, Howard Kung, Gonzalo Morales Do bond risk premiums influence the effects of debt maturity operations? Using a model with realistic bond risk premiums, we show that maturity operations have sizable effects on expected inflation and output when the central bank passively responds to inflation and the fiscal authority weakly responds to the debt level. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E4, E43, E44, E6, E63, G, G1, G12 Research Theme(s): Financial markets and funds management, Funds management, Market functioning, Financial system, Financial stability and systemic risk, Monetary policy, Monetary policy tools and implementation
Did the Renewable Fuel Standard Shift Market Expectations of the Price of Ethanol? Staff working paper 2017-35 Christiane Baumeister, Reinhard Ellwanger, Lutz Kilian It is commonly believed that the response of the price of corn ethanol (and hence of the price of corn) to shifts in biofuel policies operates in part through market expectations and shifts in storage demand, yet to date it has proved difficult to measure these expectations and to empirically evaluate this view. Content Type(s): Staff research, Staff working papers JEL Code(s): Q, Q1, Q18, Q2, Q28, Q4, Q42, Q5, Q58 Research Theme(s): Financial markets and funds management, Market functioning, Models and tools, Econometric, statistical and computational methods, Monetary policy, Inflation dynamics and pressures
The Mutable Geography of Firms’ International Trade Staff working paper 2025-11 Lu Han Exporters frequently change their market destinations. This paper introduces a new approach to identifying the drivers of these decisions over time. Analysis of customs data from China and the UK shows most changes are driven by demand rather than supply-related shocks. Content Type(s): Staff research, Staff working papers JEL Code(s): F, F1, F12, F14, L, L1, L11 Research Theme(s): Models and tools, Economic models, Structural challenges, International trade, finance and competitiveness
The Financial Origins of Non-fundamental Risk Staff working paper 2022-4 Sushant Acharya, Keshav Dogra, Sanjay Singh We explore the idea that the financial sector can be a source of non-fundamental risk to the rest of the economy. We also consider whether policy can be used to reduce this risk—either by increasing the supply of publicly backed safe assets or by reducing the demand for safe assets. Content Type(s): Staff research, Staff working papers JEL Code(s): D, D5, D52, D8, D84, E, E6, E62, G, G1, G10, G12 Research Theme(s): Financial markets and funds management, Market functioning, Financial system, Financial stability and systemic risk, Household and business credit, Monetary policy, Monetary policy tools and implementation
June 7, 2018 Establishing a Resolution Regime for Canada’s Financial Market Infrastructures Financial System Review - June 2018 Elizabeth Woodman, Lucia Chung, Nikil Chande This report highlights how an effective resolution regime promotes financial stability. It does this by ensuring that financial market infrastructures (FMIs) would be able to continue to provide their critical functions during a period of stress when an FMI’s own recovery measures were failing. The report explains the Bank of Canada’s new role as the resolution authority for FMIs, which will further bolster financial system resilience. Content Type(s): Publications, Financial System Review articles JEL Code(s): G, G1, G10, G19, G2, G20, G28, G29
Assessing global potential output growth and the US neutral rate: April 2021 Staff analytical note 2021-5 Thomas J. Carter, Xin Scott Chen, Ali Jaffery, Christopher Hajzler, Jonathan Lachaine, Peter Shannon, Subrata Sarker, Graeme Westwood, Beiling Yan We expect global potential output growth to rise to 3 percent by 2022. Relative to the last assessment in October 2020, potential output growth has been revised up across all the regions. The range of the US neutral rate remains unchanged relative to the autumn 2020 assessment. Content Type(s): Staff research, Staff analytical notes JEL Code(s): E, E1, E2, E4, E5, F, F0, O, O4 Research Theme(s): Monetary policy, Monetary policy framework and transmission, Real economy and forecasting, Structural challenges, Demographics and labour supply
Price Discounts and Cheapflation During the Post-Pandemic Inflation Surge Staff working paper 2024-31 Alberto Cavallo, Oleksiy Kryvtsov We study how price variation within a store changes with inflation, and whether households exploit these changes to reduce the burden of inflation. We find that price changes from discounts mitigated the inflation burden while cheapflation exacerbated it. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E2, E21, E3, E30, E31, L, L8, L81 Research Theme(s): Financial markets and funds management, Market functioning, Monetary policy, Inflation dynamics and pressures
Limits to Arbitrage and Deviations from Covered Interest Rate Parity Staff discussion paper 2016-4 James Pinnington, Maral Shamloo We document an increase in deviations from short-term covered interest rate parity (CIP) in the first half of 2015. Since the Swiss National Bank’s (SNB) decision to abandon its minimum exchange rate policy, both the magnitude and volatility of deviations from CIP have increased across several currency pairs. The effect is particularly pronounced for pairs involving the Swiss franc. Content Type(s): Staff research, Staff discussion papers JEL Code(s): F, F3, F31, G, G1, G15 Research Theme(s): Financial markets and funds management, International markets and currencies, Market functioning
Estimating Policy Functions in Payments Systems Using Reinforcement Learning Staff working paper 2021-7 Pablo S. Castro, Ajit Desai, Han Du, Rodney J. Garratt, Francisco Rivadeneyra We demonstrate the ability of reinforcement learning techniques to estimate the best-response functions of banks participating in high-value payments systems—a real-world strategic game of incomplete information. Content Type(s): Staff research, Staff working papers JEL Code(s): A, A1, A12, C, C7, D, D8, D83, E, E4, E42, E5, E58 Research Theme(s): Models and tools, Econometric, statistical and computational methods, Money and payments, Digital assets and fintech, Payment and financial market infrastructures