May 14, 2020 Financial System Review—2020 This issue of the Financial System Review focuses on the impact of COVID 19. The pandemic presents an unprecedented shock to the Canadian economy. This report identifies the effects on the Canadian financial system and explains how recent actions by the Bank and other policy-makers are helping to manage them. It further describes how a resilient financial system can help households and businesses smooth the effects of the COVID-19 shock and prepare for a robust recovery. Content Type(s): Publications, Financial Stability Report
Secular Economic Changes and Bond Yields Staff Working Paper 2021-14 Bruno Feunou, Jean-Sébastien Fontaine We investigate the economic forces behind the secular decline in bond yields. Before the anchoring of inflation in the mid-1990s, nominal shocks drove inflation, output and bond yields. Afterward, the impacts of nominal shocks were much less significant. Content Type(s): Staff research, Staff working papers Research Topic(s): Asset pricing, Econometric and statistical methods, Interest rates, Monetary policy and uncertainty, Potential output JEL Code(s): E, E4, E43, G, G1, G12
May 12, 1998 Measurement biases in the Canadian CPI: An update Bank of Canada Review - Spring 1998 Allan Crawford The consumer price index (CPI) is used to measure changes in the price level of consumer goods and services. As an indicator of changes in the cost of living, it is susceptible to various types of measurement biases. This article provides estimates of the size of these biases in the Canadian CPI. It concludes that the rate of increase in the CPI probably overstates the rate of increase in the cost of living by about 0.5 percentage points per year. Content Type(s): Publications, Bank of Canada Review articles Research Topic(s): Inflation and prices
May 13, 1998 Canada-U.S. long-term interest differentials in the 1990s Bank of Canada Review - Spring 1998 Kevin Clinton Long-term Canada-U.S. interest spreads have changed remarkably during the 1990s. The unusually wide spreads of the first half of the decade have given way to an unprecedented run of negative yield differentials. In this article, the author examines the conceptual aspects of yields on international assets and their application to the Canada-U.S. situation. Prior to 1995, investors were unsure that, over the long run, inflation would meet the targets set by the government and the Bank. Policy credibility was undermined by large budget deficits and political uncertainty. In the second half of the decade, confidence was re-established as the fiscal positions of governments improved, long-run price stability became established, and political concerns about Quebec lessened. As long as these fundamentals hold, long-term rates should remain relatively low, even when short-term rates rise. Content Type(s): Publications, Bank of Canada Review articles Research Topic(s): Financial markets, Interest rates, International topics
Communicating Inflation Uncertainty and Household Expectations Staff Working Paper 2023-63 Olena Kostyshyna, Luba Petersen We examine the value of direct communication to households about inflation and the uncertainty around inflation statistics. All types of information about inflation are effective at immediately managing inflation expectations, with information about outlooks being more effective and relevant than that about recent inflation and Bank targets. Content Type(s): Staff research, Staff working papers Research Topic(s): Central bank research, Credibility, Inflation and prices, Inflation targets, Monetary policy and uncertainty, Monetary policy communications JEL Code(s): C, C9, C93, D, D8, D84, E, E5, E59, E7
The Macroeconomic Effects of Debt Relief Policies During Recessions Staff Working Paper 2023-48 Soyoung Lee A large-scale reduction in mortgage principal can strengthen a recovery, support house prices and lower foreclosures. The nature of the intervention shapes its impact, which rests on how resources are redistributed across households. The availability of bankruptcy on unsecured debt changes the response to large-scale mortgage relief by reducing precautionary savings. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Credit and credit aggregates, Debt management, Housing JEL Code(s): E, E2, E21, E3, E32, E6
Behaviour in the Canadian large-value payment system: COVID-19 vs. the global financial crisis Staff Analytical Note 2021-7 Alexander Chaudhry, Anneke Kosse, Karen Sondergard Unlike the 2008–09 global financial crisis, the onset of the COVID-19 crisis did not raise stress levels in Canada’s Large Value Transfer System. Swift changes to the Bank of Canada’s collateral policy and its large-scale asset purchase programs likely eased liquidity pressures in the system. Content Type(s): Staff research, Staff analytical notes Research Topic(s): Coronavirus disease (COVID-19), Financial institutions, Financial stability, Payment clearing and settlement systems JEL Code(s): E, E4, E42, E5, E51, E58, E6, E65
ToTEM II: An Updated Version of the Bank of Canada’s Quarterly Projection Model Technical Report No. 100 José Dorich, Michael K. Johnston, Rhys R. Mendes, Stephen Murchison, Yang Zhang This report provides a detailed technical description of an updated version of the Terms-of-Trade Economic Model (ToTEM II), which replaced ToTEM (Murchison and Rennison 2006) in June 2011 as the Bank of Canada’s quarterly projection model for Canada. Content Type(s): Staff research, Technical reports Research Topic(s): Business fluctuations and cycles, Economic models JEL Code(s): E, E1, E17, E2, E20, E3, E30, E4, E40, E5, E50, F, F4, F41
Correcting Selection Bias in a Non-Probability Two-Phase Payment Survey Staff Working Paper 2025-17 Heng Chen, John Tsang We develop statistical inferences for a non-probability two-phase survey sample when relevant auxiliary information is available from a probability survey sample. The proposed method is assessed by simulation studies and used to analyze a non-probability two phase payment survey. Content Type(s): Staff research, Staff working papers Research Topic(s): Bank notes, Econometric and statistical methods JEL Code(s): C, C8, C83
Bank Runs, Bank Competition and Opacity Staff Working Paper 2021-30 Toni Ahnert, David Martinez-Miera How is the stability of the financial sector affected by competition in the deposit market and by decisions banks make about transparency? We find that policies that aim to increase bank competition lead to higher bank deposit rates, increasing both withdrawal incentives and instability. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial institutions, Financial markets, Financial stability, Financial system regulation and policies, Wholesale funding JEL Code(s): G, G0, G01, G2, G21