Benchmarks for assessing labour market health Staff Analytical Note 2022-2 Erik Ens, Corinne Luu, Kurt See, Shu Lin Wee We propose a range of benchmarks for assessing labour market strength for monetary policy. This work builds on a previous framework that considers how diverse and segmented the labour market is. We apply these benchmarks to the Canadian labour market and find that it has more than recovered from the COVID-19 shock. Content Type(s): Staff research, Staff analytical notes Research Topic(s): Business fluctuations and cycles, Coronavirus disease (COVID-19), Econometric and statistical methods, Labour markets, Monetary policy JEL Code(s): E, E2, E24, J, J2, J21, J6
Policy Coordination in an International Payment System Staff Working Paper 2008-17 James Chapman Given the increasing interdependence of both financial systems and attendant payment and settlement systems a vital question is what form should optimal policy take when there are two connected payment systems with separate regulators. Content Type(s): Staff research, Staff working papers Research Topic(s): Exchange rate regimes, Payment clearing and settlement systems JEL Code(s): E, E4, E42, E5, E58, F, F3, F31, F33
The Dynamic Canadian Debt Strategy Model Technical Report No. 127 Nicolas Audet, Joe Ning, Adam Epp, Jeffrey Gao We present a dynamic debt strategy model framework designed to assist sovereign debt portfolio managers in choosing an optimal debt issuance strategy. The main innovation of this framework is the introduction of dynamic issuance strategies, which allow issuance decisions to vary over time based on the model’s simulated state variables. Content Type(s): Staff research, Technical reports Research Topic(s): Debt management, Econometric and statistical methods, Financial markets, Fiscal policy JEL Code(s): C, C6, C61, G, G1, G11, G17, H, H6, H63, H68
A Comprehensive Evaluation of Measures of Core Inflation in Canada: An Update Staff Discussion Paper 2019-9 Helen Lao, Ceciline Steyn We provide an updated evaluation of the value of various measures of core inflation that could be used in the conduct of monetary policy. We find that the Bank of Canada’s current preferred measures of core inflation—CPI-trim, CPI-median and CPI-common—continue to outperform alternative core measures across a range of criteria. Content Type(s): Staff research, Staff discussion papers Research Topic(s): Inflation and prices, Monetary policy framework JEL Code(s): E, E3, E31, E5, E52
Monetary Policy Transmission, Bank Market Power, and Wholesale Funding Reliance Staff Working Paper 2023-35 Amina Enkhbold I study how banking market concentration and reliance on wholesale funding affect monetary policy transmission to mortgage rates. I find that this transmission is imperfect and dampens the response of consumption, output, and housing prices. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial institutions, Inflation targets, Monetary policy transmission, Wholesale funding JEL Code(s): E, E4, E44, E5, E52, G, G2, G21
Asset-Liability Management: An Overview Staff Discussion Paper 2010-10 Yuliya Romanyuk Relevant literature on asset-liability management (ALM) is reviewed and different ALM approaches are discussed that may be of interest to the Bank of Canada for the purpose of modelling the Exchange Fund Account (EFA). Content Type(s): Staff research, Staff discussion papers Research Topic(s): Foreign reserves management JEL Code(s): G, G1, G11
Redemption Runs in Canadian Corporate Bond Funds? Staff Analytical Note 2018-21 Rohan Arora Mutual funds employ a host of tools to manage redemption run risk. However, our results suggest that Canadian corporate bond funds may be vulnerable to redemption runs, especially when they are less liquid and when market volatility is high. Content Type(s): Staff research, Staff analytical notes Research Topic(s): Financial institutions, Financial markets JEL Code(s): G, G0, G01, G2, G23
Option Valuation with Observable Volatility and Jump Dynamics Staff Working Paper 2015-39 Peter Christoffersen, Bruno Feunou, Yoontae Jeon Under very general conditions, the total quadratic variation of a jump-diffusion process can be decomposed into diffusive volatility and squared jump variation. We use this result to develop a new option valuation model in which the underlying asset price exhibits volatility and jump intensity dynamics. Content Type(s): Staff research, Staff working papers Research Topic(s): Asset pricing JEL Code(s): G, G1, G12
The Fisher BCPI: The Bank of Canada’s New Commodity Price Index Staff Discussion Paper 2010-6 Ilan Kolet, Ryan Macdonald The prices of commodities produced in Canada have important implications for the performance of the Canadian economy and the conduct of monetary policy. The authors explain an important change to the methodology used to construct the Bank of Canada commodity price index (BCPI). Content Type(s): Staff research, Staff discussion papers Research Topic(s): Econometric and statistical methods, Inflation and prices JEL Code(s): C, C1, E, E3
Avoiding the Pitfalls: Can Regime-Switching Tests Detect Bubbles? Staff Working Paper 1996-11 Simon van Norden, Robert Vigfusson Work on testing for bubbles has caused much debate, much of which has focussed on methodology. Monte Carlo simulations reported in Evans (1991) showed that standard tests for unit roots and cointegration frequently reject the presence of bubbles even when such bubbles are present by construction. Evans referred to this problem as the pitfall of testing for bubbles. Content Type(s): Staff research, Staff working papers Research Topic(s): Econometric and statistical methods JEL Code(s): C, C2, C22, C5, C52