Modelling Canadian mortgage debt and payments in a semi-structural model Staff Analytical Note 2024-1 Fares Bounajm, Austin McWhirter We show how Canadian mortgage debt dynamics can be modelled in a semi-structural macroeconomic model, such as the Bank of Canada’s LENS. The model we propose accounts for Canada’s unique mortgage debt structure. Content Type(s): Staff research, Staff analytical notes Research Topic(s): Economic models, Monetary policy transmission JEL Code(s): E, E2, E27, E4, E43, E47, G, G5, G51
Implementing Market-Based Indicators to Monitor Vulnerabilities of Financial Institutions Staff Analytical Note 2016-5 Cameron MacDonald, Maarten van Oordt, Robin Scott This note introduces several market-based indicators and examines how they can further inform the Bank of Canada’s vulnerability assessment of Canadian financial institutions. Market-based indicators of leverage suggest that the solvency risk for major Canadian banks has increased since the beginning of the oil-price correction in the second half of 2014. Content Type(s): Staff research, Staff analytical notes Research Topic(s): Financial institutions, Financial stability JEL Code(s): G, G1, G10, G2, G21
The Central Bank Strikes Back! Credibility of Monetary Policy under Fiscal Influence Staff Working Paper 2022-11 Antoine Camous, Dmitry Matveev Central banks in many advanced economies enjoy a high degree of independence, which protects monetary policy decisions from political influence. But how should independent central banks react if pressured by fiscal policy-makers? We examine whether a central bank should design a monetary policy framework that prescribes acting conditionally on how fiscal policy behaves. Content Type(s): Staff research, Staff working papers Research Topic(s): Credibility, Fiscal policy, Monetary policy JEL Code(s): E, E0, E02, E5, E52, E58, E6, E61, E62
Composite Likelihood Estimation of an Autoregressive Panel Probit Model with Random Effects Staff Working Paper 2019-16 Kerem Tuzcuoglu Modeling and estimating persistent discrete data can be challenging. In this paper, we use an autoregressive panel probit model where the autocorrelation in the discrete variable is driven by the autocorrelation in the latent variable. In such a non-linear model, the autocorrelation in an unobserved variable results in an intractable likelihood containing high-dimensional integrals. Content Type(s): Staff research, Staff working papers Research Topic(s): Credit risk management, Econometric and statistical methods, Economic models JEL Code(s): C, C2, C23, C25, C5, C58, G, G2, G24
What COVID-19 revealed about the resilience of bond funds Staff Analytical Note 2020-18 Guillaume Ouellet Leblanc, Ryan Shotlander The liquidity management strategies of fund managers, supported by policy measures, have helped bond funds limit the increase in redemptions caused by COVID 19. This avoided further deterioration in liquidity in bond markets. Nevertheless, these funds were left with lower cash buffers, which could make them more vulnerable to additional large redemptions. Content Type(s): Staff research, Staff analytical notes Research Topic(s): Financial markets, Financial stability JEL Code(s): G, G1, G2, G20, G23
Regime Switches in the Risk-Return Trade-Off Staff Working Paper 2013-51 Eric Ghysels, Pierre Guérin, Massimiliano Marcellino This paper deals with the estimation of the risk-return trade-off. We use a MIDAS model for the conditional variance and allow for possible switches in the risk-return relation through a Markov-switching specification. Content Type(s): Staff research, Staff working papers Research Topic(s): Econometric and statistical methods, Financial markets JEL Code(s): G, G1, G10, G12
The International Exposure of the Canadian Banking System Staff Working Paper 2025-1 Christian Friedrich, Hanno Friedrich, Nick Lawrence, Javier Cortes Orihuela, Phoebe Tian In 2023, the share of Canadian banks’ foreign assets and liabilities amounted to around 50%. While Canadian banks engage domestically mostly with households and non-financial corporations, their most common counterparties abroad are non-bank financial institutions. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial institutions, Financial stability, International financial markets, International topics JEL Code(s): F, F2, F21, F23, F3, F31, F32, G, G2, G21, G23, G3
December 8, 2011 Financial System Review - December 2011 In this issue of the Financial System Review, the Bank of Canada’s Governing Council judges that the risks to the stability of Canada’s financial system are high and have increased markedly over the past six months, owing primarily to an escalation of the sovereign debt crisis in the euro area and a weaker global economic outlook. Erratum: The data for Chart 7 on page 8 were plotted incorrectly. See revised chart. Content Type(s): Publications, Financial Stability Report
February 21, 2025 Tariffs, structural change and monetary policy Remarks Tiff Macklem Mississauga Board of Trade-Oakville Chamber of Commerce Mississauga, Ontario Governor Tiff Macklem discusses the potential impact of a trade conflict with the United States. He also launches the review of the Bank’s monetary policy framework. Content Type(s): Press, Speeches and appearances, Remarks Research Topic(s): Economic models, Housing, Inflation targets, International topics, Monetary policy and uncertainty, Monetary policy framework, Potential output, Productivity, Recent economic and financial developments, Trade integration
Managing Risk Taking with Interest Rate Policy and Macroprudential Regulations Staff Working Paper 2016-47 Simona Cociuba, Malik Shukayev, Alexander Ueberfeldt We develop a model in which a financial intermediary’s investment in risky assets—risk taking—is excessive due to limited liability and deposit insurance and characterize the policy tools that implement efficient risk taking. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial system regulation and policies, Monetary policy framework JEL Code(s): E, E4, E44, E5, E52, G, G1, G11, G18