February 23, 2012 Medium-Term Fluctuations in Canadian House Prices Bank of Canada Review - Winter 2011-2012 Brian Peterson, Yi Zheng This article draws on theory and empirical evidence to examine a number of factors behind movements in Canadian house prices. It begins with an overview of the movements in house prices in Canada, using regional data to highlight factors that influence prices over the long run. It then turns to the central theme, that there are medium-run movements in prices not accounted for by long-run factors. Drawing on recent Bank of Canada research, the article discusses several factors behind these medium-run movements, including interest rates, expected price appreciation and market liquidity. The article concludes by identifying areas for future research that would further our understanding of fluctuations in house prices. Content Type(s): Publications, Bank of Canada Review articles Topic(s): Asset pricing, Econometric and statistical methods, Market structure and pricing JEL Code(s): R, R2, R21, R3, R31
February 23, 2012 Household Insolvency in Canada Bank of Canada Review - Winter 2011-2012 Jason Allen, H. Evren Damar With increasing levels of household debt in recent years, the number of households that may be vulnerable to a negative economic shock is rising as well. Decisions made by both the debtor and the creditor can contribute to insolvency. This article presents some stylized facts about insolvency in Canada’s household sector and analyzes the role of creditors in insolvencies. The average debt of an individual filing for bankruptcy is more than 1.5 times that of an average Canadian household; bankruptcy filers tend to be unemployed or in low-wage jobs, and are typically renters. The article reports that banks that approve more loans per branch, which is interpreted as less-intensive use of soft information (such as the loan officer’s assessment of the applicant’s character), experience more client bankruptcies. This finding has important policy implications, because financial institutions that do not use soft information risk further deterioration in their lending portfolios. Content Type(s): Publications, Bank of Canada Review articles Topic(s): Financial institutions, Financial services JEL Code(s): D, D4, G, G2
Why Is Cash (Still) So Entrenched? Insights from the Bank of Canada’s 2009 Methods-of-Payment Survey Staff Discussion Paper 2012-2 Carlos Arango, Dylan Hogg, Alyssa Lee The authors present key insights from the Bank of Canada’s 2009 Methods-of-Payment survey. In the survey, about 6,800 participants completed a questionnaire with detailed information regarding their personal finances, as well as their use and perceptions of different payment methods. Content Type(s): Staff research, Staff discussion papers Topic(s): Bank notes, Financial services JEL Code(s): D, D1, D12, E, E4, E41, L, L8, L81
February 17, 2012 Weekly Financial Statistics - 17 February 2012 Content Type(s): Publications, Historical: Weekly Financial Statistics
An International Dynamic Term Structure Model with Economic Restrictions and Unspanned Risks Staff Working Paper 2012-5 Gregory Bauer, Antonio Diez de los Rios We construct a multi-country affine term structure model that contains unspanned macroeconomic and foreign exchange risks. The canonical version of the model is derived and is shown to be easy to estimate. Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Exchange rates, Interest rates JEL Code(s): E, E4, E43, F, F3, F31, G, G1, G12, G15
February 13, 2012 Bank of Canada submits comments to U.S. regulators regarding Joint Proposal on Prohibitions and Restrictions on Proprietary Trading Comments Mark Carney The Bank of Canada today submitted written comments to U.S. regulators regarding their proposed rule to implement Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Content Type(s): Press, Speeches and appearances, Comments
February 10, 2012 Weekly Financial Statistics - 10 February 2012 Content Type(s): Publications, Historical: Weekly Financial Statistics
Price Competition and Concentration in Search and Negotiation Markets: Evidence from Mortgage Lending Staff Working Paper 2012-4 Jason Allen, Robert Clark, Jean-François Houde This paper examines the impact of bank consolidation on mortgage rates in order to evaluate the extent to which mortgage markets are competitive. Mortgage markets are decentralized and so rates are determined through a search and negotiation process. Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial services, Interest rates JEL Code(s): G, G2, L, L1
Fooled by Search: Housing Prices, Turnover and Bubbles Staff Working Paper 2012-3 Brian Peterson his paper develops and estimates a model to explain the behaviour of house prices in the United States. The main finding is that over 70% of the increase in house prices relative to trend during the increase of house prices in the United States from 1995 to 2006 can be explained by a pricing mechanism where market participants are ‘Fooled by Search.’ Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Business fluctuations and cycles JEL Code(s): E, E3, R, R2, R21
February 7, 2012 Raising the House of Reform Remarks Tiff Macklem Rotman Institute for International Business Toronto, Ontario Senior Deputy Governor Tiff Macklem discusses the importance of pressing ahead with financial reforms despite the weak global recovery. Content Type(s): Press, Speeches and appearances, Remarks