Staff working papers

• Tariffs and the Exchange Rate: Evidence from Twitter

  Staff Working Paper 2021-36 Dmitry Matveev, Francisco Ruge-Murcia

  Do tariffs affect exchange rates? We look at President Trump’s tweets during talks on the North American Free Trade Agreement and find that anticipation of higher tariffs on imports from Canada and Mexico led to an appreciation of the US dollar relative to Canadian and Mexican currency.

  Content Type(s): Staff research, Staff working papers Topic(s): Exchange rates, Trade integration JEL Code(s): F, F1, F13, F3, F31

• Stressed but not Helpless: Strategic Behaviour of Banks Under Adverse Market Conditions

  Staff Working Paper 2021-35 Grzegorz Halaj, Sofia Priazhkina

  Our stress-testing tool considers banks under stress that can strategically manage their balance sheets. Using confidential Canadian supervisory data, we assess whether bank behaviour to maximize shareholder value can amplify a hypothetical stress scenario.

  Content Type(s): Staff research, Staff working papers Topic(s): Central bank research, Economic models, Financial institutions, Financial stability, Financial system regulation and policies JEL Code(s): C, C6, C63, C7, C72, G, G2, G21

• The Side Effects of Safe Asset Creation

  Staff Working Paper 2021-34 Sushant Acharya, Keshav Dogra

  The secular decline in real interest rates has created a challenge for monetary policy, now confronting the zero lower bound more often. An increase in the supply of safe assets reduces downward pressure on the natural interest rate. This allows monetary policy to reach price stability and full employment, but not without cost—permanently lower investment.

  Content Type(s): Staff research, Staff working papers Topic(s): Fiscal policy, Monetary policy implementation JEL Code(s): E, E3, E4, E5, G, G1, H, H6

• The Anatomy of Sentiment-Driven Fluctuations

  Staff Working Paper 2021-33 Sushant Acharya, Jess Benhabib, Zhen Huo

  We show that changes in sentiment that aren’t related to fundamentals can drive persistent macroeconomic fluctuations even when all economic agents are rational. Changes in sentiment can also affect how fundamental shocks affect macroeconomic outcomes.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Economic models JEL Code(s): E, E2, E20, E3, E32, F, F4, F44

• The Effects of Government Licensing on E-commerce: Evidence from Alibaba

  Staff Working Paper 2021-32 Ginger Zhe Jin, Zhentong Lu, Xiaolu Zhou, Chunxiao Li

  How does government licensing affect selling on online platforms? We examine the impact of China’s 2015 Food Safety Law on sellers and buyers on Alibaba, the largest e-commerce platform in that country.

  Content Type(s): Staff research, Staff working papers Topic(s): Market structure and pricing, Recent economic and financial developments JEL Code(s): D, D8, D82, K, K2, K23, L, L5, L8, L81