What People Believe About Monetary Finance and What We Can(’t) Do About It: Evidence from a Large-Scale, Multi-Country Survey Experiment Staff Working Paper 2023-36 Cars Hommes, Julien Pinter, Isabelle Salle We conduct a large-scale survey to shed light on what people believe about public finance. An experiment demonstrates that central bank communication can persistently shift views on monetary financing. It further suggests that views on monetary financing impact support for fiscal discipline. Content Type(s): Staff research, Staff working papers Research Topic(s): Central bank research, Fiscal policy, Monetary policy JEL Code(s): C, C8, C83, E, E5, E58, E6, E60, E62, E7, E70, G, G5, G53, H, H3, H31
An Investigation into the Effects of Border Carbon Adjustments on the Canadian Economy Staff Working Paper 2023-27 Y.-H. Henry Chen, Hossein Hosseini Jebeli, Craig Johnston, Sergey Paltsev, Marie-Christine Tremblay We examine the economic implications of border carbon adjustments (BCAs) for Canada. We find that, BCAs, in the form of import tariffs, reduce Canada’s carbon leakage and improve its competitiveness when Canada is part of a broad coalition of BCA-implementing countries. Welfare also improves when tariff revenues are transferred to households. Content Type(s): Staff research, Staff working papers Research Topic(s): Climate change, International topics, Trade integration JEL Code(s): C, C6, C68, F, F1, H, H2, Q, Q3, Q37, Q5
Pricing Indefinitely Lived Assets: Experimental Evidence Staff Working Paper 2023-25 John Duffy, Janet Hua Jiang, Huan Xie We study the trading of an asset with bankruptcy risk. The traded price of the asset is, on average, 40% of the expected total dividend payments. We investigate which economic models can explain the low traded price. Content Type(s): Staff research, Staff working papers Research Topic(s): Asset pricing, Financial markets JEL Code(s): C, C9, C91, C92, D, D8, D81, G, G1, G12
From LVTS to Lynx: Quantitative Assessment of Payment System Transition Staff Working Paper 2023-24 Ajit Desai, Zhentong Lu, Hiru Rodrigo, Jacob Sharples, Phoebe Tian, Nellie Zhang We quantitatively assess the changes in participants’ payment behaviour from modernizing Canada's high-value payments system to Lynx. Our analysis suggests that Lynx's liquidity-saving mechanism encourages liquidity pooling and early payments submission, resulting in improved efficiency for participants but with slightly increased payment delays. Content Type(s): Staff research, Staff working papers Research Topic(s): Financial institutions, Financial services, Financial system regulation and policies, Payment clearing and settlement systems JEL Code(s): C, C1, C10, E, E4, E42, G, G2, G28
Turning Words into Numbers: Measuring News Media Coverage of Shortages Staff Discussion Paper 2023-8 Lin Chen, Stéphanie Houle We develop high-frequency, news-based indicators using natural language processing methods to analyze news media texts. Our indicators track both supply (raw, intermediate and final goods) and labour shortages over time. They also provide weekly time-varying topic narratives about various types of shortages. Content Type(s): Staff research, Staff discussion papers Research Topic(s): Coronavirus disease (COVID-19), Econometric and statistical methods, Monetary policy and uncertainty, Recent economic and financial developments JEL Code(s): C, C5, C55, C8, C82, E, E3, E37
Supply Drivers of US Inflation Since the COVID-19 Pandemic Staff Working Paper 2023-19 Serdar Kabaca, Kerem Tuzcuoglu This paper examines the contribution of several supply factors to US headline inflation since the start of the COVID-19 pandemic. We identify six supply shocks using a structural VAR model: labor supply, labor productivity, global supply chain, oil price, price mark-up and wage mark-up shocks. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Econometric and statistical methods, Inflation and prices JEL Code(s): C, C3, C32, E, E3, E31, E32
We Didn’t Start the Fire: Effects of a Natural Disaster on Consumers’ Financial Distress Staff Working Paper 2023-15 Anson T. Y. Ho, Kim Huynh, David T. Jacho-Chávez, Geneviève Vallée We use detailed consumer credit data to investigate the impact of the 2016 Fort McMurray wildfire, the costliest wildfire disaster in Canadian history, on consumers’ financial stress. We focus on the arrears of insured mortgages because of their important implications for financial institutions and insurers’ business risk and relevant management practices. Content Type(s): Staff research, Staff working papers Research Topic(s): Climate change, Credit and credit aggregates, Econometric and statistical methods, Financial stability JEL Code(s): C, C2, C21, D, D1, D12, G, G2, G21, Q, Q5, Q54
Learning in a Complex World: Insights from an OLG Lab Experiment Staff Working Paper 2023-13 Cars Hommes, Stefanie J. Huber, Daria Minina, Isabelle Salle This paper brings novel insights into group coordination and price dynamics in complex environments. We implement a chaotic overlapping-generation model in the lab and find that group coordination is always on the steady state or on the two-cycle and that behavior is non-monotonic. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Economic models JEL Code(s): C, C6, C62, C68, C9, C91, C92, E, E1, E13, E7, E70, G, G1, G12, G4, G41
Inflation, Output, and Welfare in the Laboratory Staff Working Paper 2023-11 Janet Hua Jiang, Daniela Puzzello, Cathy Zhang We investigate the effect of inflation on output and welfare in the laboratory. Consistent with monetary theory, we find that inflation acts as a tax on monetary exchange and reduces output and welfare. Content Type(s): Staff research, Staff working papers Research Topic(s): Inflation and prices, Inflation: costs and benefits, Monetary policy JEL Code(s): C, C9, C92, D, D8, D83, E, E4, E40
Introducing the Bank of Canada’s Market Participants Survey Staff Analytical Note 2023-1 Annick Demers, Tamara Gomes, Stephane Gignac The Market Participants Survey (MPS) gathers financial market participants’ expectations for key macroeconomic and financial variables and for monetary policy. This staff analytical note describes the MPS’s objectives and main features, its process and design, and how Bank of Canada staff use the results. Content Type(s): Staff research, Staff analytical notes Research Topic(s): Financial markets, Monetary policy and uncertainty, Recent economic and financial developments JEL Code(s): C, C8, C83, E, E4, E44, E5, E52, E58, G, G1, G12, G14