Firm dynamics

• Financial Constraints and Corporate Investment in China

  Staff Discussion Paper 2022-22 Kun Mo, Michel Soudan

  Financial constraints deter firms from pursuing optimal investment plans. In China, we find privately owned firms face greater financial constraints than state-owned enterprises (SOEs). This can be explained by our finding that lenders appear less concerned about the credit risk of SOEs, which causes distortions in the allocation of credit.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Financial markets, Firm dynamics JEL Code(s): E, E2, E22, G, G1, G3

• CANVAS: A Canadian Behavioral Agent-Based Model

  Staff Working Paper 2022-51 Cars Hommes, Mario He, Sebastian Poledna, Melissa Siqueira, Yang Zhang

  The Bank of Canada’s current suite of models faces challenges in addressing network effects that integrate household and firm-level heterogeneity and their behaviours. We develop CANVAS, a Canadian behavioural agent-based model to contribute to the Bank’s next-generation modelling effort. CANVAS improves forecasting performance and expands capacity for model-based scenario analysis.

  Content Type(s): Staff research, Staff working papers Topic(s): Central bank research, Econometric and statistical methods, Economic models, Firm dynamics, Inflation and prices JEL Code(s): C, D, D2, D22, D8, D83, E, E1, E17

• Monetary Policy, Credit Constraints and SME Employment

  Staff Working Paper 2022-49 Julien Champagne, Émilien Gouin-Bonenfant

  We revisit an old question: how do financial constraints affect the transmission of monetary policy to the real economy? To answer this question, we propose a simple empirical strategy that combines firm-level employment and balance sheet data, identified monetary policy shocks and survey data on financing activities.

  Content Type(s): Staff research, Staff working papers Topic(s): Credit and credit aggregates, Econometric and statistical methods, Firm dynamics, Labour markets, Monetary policy JEL Code(s): E, E2, E3, E4, E43, E5, E52, G, G3