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We study the cyclical properties of sales, regular price changes and average prices paid by consumers (“effective” prices) using data on prices and quantities sold for numerous retailers across many U.S. metropolitan areas.

The author develops a measure of aggregate private sector wealth in Canada and examines its ability to explain aggregate consumption of non-durables and services. This wealth measure includes financial, physical and human wealth. The author measures human wealth as the expected present value of aggregate labour income, net of government expenditures, based on a discrete […]

This paper investigates the determinants of corporate risk taking. Shareholders with substantial equity ownership in a single company may advocate conservative investment policies due to greater exposure to firm risk.

The sharp depreciation of the Canadian dollar and the successful launch of the euro have spawned an animated debate in Canada concerning the potential benefits of formally adopting the U.S. dollar as our national currency.

This note explores the drivers behind the recent increase in the US participation rate in the labour market and assesses the likelihood of a similar gain in Canada. The growth in the US participation rate has largely been due to a pickup in the participation of prime-age workers following a post-recession decline.

We analyze the transmission of monetary policy during different phases of a sectoral demand reallocation episode when there are frictions to increasing production in a sector. Monetary policy is more effective in reducing inflation when a larger proportion of sectors are expanding or expect to expand in the near future.

The author proposes a test for the parametric specification of each component in the diffusion matrix of a d-dimensional diffusion process. Overall, d (d-1)/2 test statistics are constructed for the off-diagonal components, while d test statistics are constructed for the main diagonal components.

The Canadian overnight repo market persistently shows signs of latent funding pressure around month-end periods. Both the overnight repo rate and Bank of Canada liquidity provision tend to rise in these windows. This paper proposes three non-mutually exclusive hypotheses to explain this phenomenon.

In this paper, a quarterly growth-accounting data set is built for the Canadian business sector with the top-down approach of Diewert and Yu (2012). Inputs and outputs are measured and used to estimate the quarterly total factor productivity (TFP).

The spread between long-term and short-term interest rates has proven to be an excellent predictor of changes of economic activity in Canada. As a general rule, when long-term interest rates have been much above short-term rates, strong increases in output have followed within about a year; however, whenever the yield curve has been inverted for any extended period of time, a recession has followed. Similar findings exist for other countries, including the United States. But although Canadian and U.S. interest rates generally move quite closely together, the Canadian yield curve has been distinctly better at predicting future Canadian output. The explanation given for this result is that the term spread has reflected both current monetary conditions, which affect short-term interest rates, and expected real returns on investment and expectations of inflation, which are the main determinants of long-term rates. This article is mainly a summary of econometric work done at the Bank. It also touches on some of the extensive recent literature in this area.