Staff research

• A Review of the Bank of Canada’s Support of Key Financial Markets During the COVID-19 Crisis

  Staff Discussion Paper 2023-9 Joshua Fernandes, Michael Mueller

  The COVID-19 pandemic placed unprecedented strain on the global financial system. We describe how the Bank of Canada responded to the rapidly deteriorating liquidity in core Canadian fixed-income markets.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Coronavirus disease (COVID-19), Financial markets, Market structure and pricing, Monetary policy and uncertainty JEL Code(s): E, E4, E44, E5, E58, G, G0, G01

• 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 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 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

• Narrative-Driven Fluctuations in Sentiment: Evidence Linking Traditional and Social Media

  Staff Working Paper 2023-23 Alistair Macaulay, Wenting Song

  News media present competing interpretations of what breaking news implies for the macroeconomy. Recent examples include news reporting on high inflation and yield curve inversions. Do these narratives shape macroeconomic sentiment? In this paper, we highlight the importance of narratives using evidence linking traditional media and social media.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial markets, Inflation and prices, Monetary policy JEL Code(s): D, D8, D84, E, E3, E32, E4, E43, E44, E5, G, G1

• The Impact of Unemployment Insurance and Unsecured Credit on Business Cycles

  Staff Working Paper 2023-22 Michael Irwin

  This paper studies how unsecured consumer credit impacts the extent to which unemployment insurance (UI) policies smooth aggregate consumption fluctuations over the business cycle. Using a general equilibrium real business cycle model, I find that unsecured credit amplifies the extent to which UI smooths cyclical consumption fluctuations.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Credit and credit aggregates, Economic models, Fiscal policy, Labour markets JEL Code(s): E, E2, E21, E24, E3, E32, E4, E44, E6, E62

• Trade and Diffusion of Embodied Technology: An Empirical Analysis

  Staff Working Paper 2023-21 Stephen Ayerst, Faisal Ibrahim, Gaelan MacKenzie, Swapnika Rachapalli

  Using data from patents, citations, inter-sectoral sales and customs, we examine the international diffusion of technology through imports of sectoral knowledge and production inputs. We develop an instrumental variable strategy to identify the causal effects of technology embodied in imports on innovation and diffusion outcomes.

  Content Type(s): Staff research, Staff working papers Topic(s): Development economics, International topics, Productivity, Trade integration JEL Code(s): F, F1, F14, F6, F61, O, O1, O19, O3, O31, O33

• Demographic Origins of the Decline in Labor’s Share

  Staff Working Paper 2023-20 Andrew Glover, Jacob Short

  Declining labour market dynamism of workers results in an increasing wedge between their earnings and their marginal product as they age. This wedge and the demographic shift in the earnings shares of older workers can account for 59% of the decline in labor’s share of earnings in the United States.

  Content Type(s): Staff research, Staff working papers Topic(s): Labour markets, Productivity JEL Code(s): D, D3, D33, E, E2, E25, J, J1, J3, J6, J62

• What we can learn by linking firms’ reported emissions with their financial data

  Staff Analytical Note 2023-4 Matthew Ackman, Timothy Grieder, Callie Symmers, Geneviève Vallée

  We analyze the financial statements and stock prices of publicly traded firms incorporated in Canada that report greenhouse gas emissions. We find that these firms primarily use equity financing. We also find that equity investors increasingly account for firms’ emissions when making investment decisions but the impact appears small. This suggests that assets exposed to climate change remain at risk of a sudden repricing.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Asset pricing, Climate change, Financial stability, Firm dynamics JEL Code(s): G, G1, G3, Q, Q5