Aggregate Fluctuations and the Role of Trade Credit Staff Working Paper 2017-37 Lin Shao In an economy where production takes place in multiple stages and is subject to financial frictions, how firms finance intermediate inputs matters for aggregate outcomes. This paper focuses on trade credit—the lending and borrowing of input goods between firms—and quantifies its aggregate impacts during the Great Recession. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Credit and credit aggregates, Firm dynamics JEL Code(s): E, E3, E32, E4, E44, E5, E51
September 18, 2017 How Canada’s International Trade is Changing with the Times Remarks Timothy Lane Saskatoon Regional Economic Development Authority Saskatoon, Saskatchewan Deputy Governor Timothy Lane discusses the changing nature of international trade and the factors that are propelling it. Content Type(s): Press, Speeches and appearances, Remarks Research Topic(s): Business fluctuations and cycles, International topics, Productivity, Recent economic and financial developments, Trade integration
The Rise of Non-Regulated Financial Intermediaries in the Housing Sector and its Macroeconomic Implications Staff Working Paper 2017-36 Hélène Desgagnés I examine the impact of non-regulated lenders in the mortgage market using a dynamic stochastic general equilibrium (DSGE) model. My model features two types of financial intermediaries that differ in three ways: (i) only regulated intermediaries face a capital requirement, (ii) non-regulated intermediaries finance themselves by selling securities and cannot accept deposits, and (iii) non-regulated intermediaries face a more elastic demand. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Economic models, Financial system regulation and policies, Housing JEL Code(s): E, E3, E32, E4, E44, E47, E6, E60, G, G2, G21, G23, G28
How to Predict Financial Stress? An Assessment of Markov Switching Models Staff Working Paper 2017-32 Benjamin Klaus, Thibaut Duprey This paper predicts phases of the financial cycle by using a continuous financial stress measure in a Markov switching framework. The debt service ratio and property market variables signal a transition to a high financial stress regime, while economic sentiment indicators provide signals for a transition to a tranquil state. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Central bank research, Econometric and statistical methods, Financial markets, Financial stability, Financial system regulation and policies, Monetary and financial indicators JEL Code(s): C, C5, C54, G, G0, G01, G1, G15
A Structural Interpretation of the Recent Weakness in Business Investment Staff Analytical Note 2017-7 Russell Barnett, Rhys R. Mendes Since 2012, business investment growth has slowed considerably in advanced economies, averaging a little less than 2 per cent versus the 4 per cent growth rates experienced in the period leading up to crisis. Several recent studies have attributed a large part of the weakness in business investment to cyclical factors, including soft aggregate demand, and, to a lesser degree, heightened uncertainty and tighter financial conditions. Content Type(s): Staff research, Staff analytical notes Research Topic(s): Business fluctuations and cycles, Domestic demand and components, Recent economic and financial developments JEL Code(s): E, E2, E22, E3, E37
Understanding the Cross‐Country Effects of US Technology Shocks Staff Working Paper 2017-23 Thuy Lan Nguyen, Wataru Miyamoto Business cycles are substantially correlated across countries. Yet most existing models are not able to generate substantial transmission through international trade. We show that the nature of such transmission depends fundamentally on the features determining the responsiveness of labor supply and labor demand to international relative prices. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Economic models, International topics JEL Code(s): E, E3, E30, F, F4, F41, F44, F6, F62
A Three‐Frequency Dynamic Factor Model for Nowcasting Canadian Provincial GDP Growth Staff Discussion Paper 2017-8 Tony Chernis, Gabriella Velasco, Calista Cheung This paper estimates a three‐frequency dynamic factor model for nowcasting Canadian provincial gross domestic product (GDP). Canadian provincial GDP is released by Statistics Canada on an annual basis only, with a significant lag (11 months). Content Type(s): Staff research, Staff discussion papers Research Topic(s): Business fluctuations and cycles, Econometric and statistical methods, Regional economic developments JEL Code(s): C, C5, C53, E, E3, E32, E37, R, R1, R11
Should Central Banks Worry About Nonlinearities of their Large-Scale Macroeconomic Models? Staff Working Paper 2017-21 Vadym Lepetyuk, Lilia Maliar, Serguei Maliar How wrong could policymakers be when using linearized solutions to their macroeconomic models instead of nonlinear global solutions? Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Econometric and statistical methods, Economic models JEL Code(s): C, C6, C61, C63, C68, E, E3, E31, E5, E52
Volatility Risk and Economic Welfare Staff Working Paper 2017-20 Shaofeng Xu This paper examines the effects of time-varying volatility on welfare. I construct a tractable endogenous growth model with recursive preferences, stochastic volatility, and capital adjustment costs. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Economic models JEL Code(s): E, E2, E3
May 11, 2017 Why Is Global Business Investment So Weak? Some Insights from Advanced Economies Bank of Canada Review - Spring 2017 Robert Fay, Justin-Damien Guénette, Martin Leduc, Louis Morel Various drivers of business investment can be used to explain the underwhelming performance of investment in advanced economies since the global financial crisis, particularly since 2014. The slow growth in aggregate demand cannot by itself explain the full extent of the recent weakness in investment, which appears to be linked primarily to the collapse of global commodity prices and a rise in economic uncertainty. Looking ahead, business investment growth is likely to remain slower than in the pre-crisis period, largely because of structural factors such as population aging. Content Type(s): Publications, Bank of Canada Review articles Research Topic(s): Business fluctuations and cycles, Domestic demand and components, Economic models, International topics, Monetary policy and uncertainty, Recent economic and financial developments JEL Code(s): C, C2, C22, D, D2, D24, D8, D80, E, E2, E22, F, F0, F01, G, G3, G31