C - Mathematical and Quantitative Methods

• The Evolution of Unobserved Skill Returns in the U.S.: A New Approach Using Panel Data

  Staff Working Paper 2017-61 Lance Lochner, Youngmin Park, Youngki Shin

  Economists disagree about the factors driving the substantial increase in residual wage inequality in the United States over the past few decades. To identify changes in the returns to unobserved skills, we make a novel assumption about the dynamics of skills (especially among older workers) rather than about the stability of skill distributions across cohorts, as is standard.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Labour markets JEL Code(s): C, C2, C23, J, J2, J24, J3, J31

• A Barometer of Canadian Financial System Vulnerabilities

  Staff Analytical Note 2017-24 Thibaut Duprey, Tom Roberts

  This note presents a composite indicator of Canadian financial system vulnerabilities—the Vulnerabilities Barometer. It aims to complement the Bank of Canada’s vulnerabilities assessment by adding a quantitative and synthesized perspective to the more granular (distributional) analysis presented in the Financial System Review.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Econometric and statistical methods, Financial stability, Monetary and financial indicators JEL Code(s): C, C1, C14, C4, C40, D, D1, D14, E, E3, E32, E6, E66, F, F0, F01, G, G0, G01, G1, G15, G2, G21, H, H6, H63

• Bitcoin Awareness and Usage in Canada

  Staff Working Paper 2017-56 Christopher Henry, Kim Huynh, Gradon Nicholls

  There has been tremendous discussion of Bitcoin, digital currencies and FinTech. However, there is limited empirical evidence of Bitcoin’s adoption and usage. We propose a methodology to collect a nationally representative sample using the Bitcoin Omnibus Survey (BTCOS) to track the ubiquity and usage of Bitcoin in Canada.

  Content Type(s): Staff research, Staff working papers Topic(s): Bank notes, Digital currencies and fintech, Econometric and statistical methods JEL Code(s): C, C1, C12, E, E4

• Competing Currencies in the Laboratory

  Staff Working Paper 2017-53 Janet Hua Jiang, Cathy Zhang

  We investigate competition between two intrinsically worthless currencies as a result of decentralized interactions between human subjects. We design a laboratory experiment based on a simple two-country, two-currency search model to study factors that affect circulation patterns and equilibrium selection.

  Content Type(s): Staff research, Staff working papers Topic(s): Central bank research, Digital currencies and fintech JEL Code(s): C, C9, C92, D, D8, D83, E, E4, E40

• Identifying the Degree of Collusion Under Proportional Reduction

  Staff Working Paper 2017-51 Oleksandr Shcherbakov, Naoki Wakamori

  Proportional reduction is a common cartel practice in which cartel members reduce their output proportionately. We develop a method to quantify this reduction relative to a benchmark market equilibrium scenario and relate the reduction to the traditional conduct parameter.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, Market structure and pricing JEL Code(s): C, C3, C36, D, D2, D22, L, L4, L41

• Is the Discretionary Income Effect of Oil Price Shocks a Hoax?

  Staff Working Paper 2017-50 Christiane Baumeister, Lutz Kilian, Xiaoqing Zhou

  The transmission of oil price shocks has been a question of central interest in macroeconomics since the 1970s. There has been renewed interest in this question after the large and persistent fall in the real price of oil in 2014–16. In the context of this debate, Ramey (2017) makes the striking claim that the existing literature on the transmission of oil price shocks is fundamentally confused about the question of how to quantify the effect of oil price shocks.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, International topics JEL Code(s): C, C5, C51, Q, Q4, Q43

• Evaluating Real GDP Growth Forecasts in the Bank of Canada Monetary Policy Report

  Staff Analytical Note 2017-21 André Binette, Dmitri Tchebotarev

  This paper examines the quality of projections of real GDP growth taken from the Bank of Canada Monetary Policy Report (MPR) since they were first published in 1997. Over the last decade, it has become common practice among the central banking community to discuss forecast performance publicly.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Business fluctuations and cycles, Econometric and statistical methods, Monetary policy JEL Code(s): C, C5, C52, E, E3, E32, E37, E5, E52

• On the Tail Risk Premium in the Oil Market

  Staff Working Paper 2017-46 Reinhard Ellwanger

  This paper shows that changes in market participants’ fear of rare events implied by crude oil options contribute to oil price volatility and oil return predictability. Using 25 years of historical data, we document economically large tail risk premia that vary substantially over time and significantly forecast crude oil futures and spot returns.

  Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Econometric and statistical methods, Financial markets JEL Code(s): C, C5, C53, C58, D, D8, D84, E, E4, E44, G, G1, G12, G13, Q, Q4, Q43

• Identification of Random Resource Shares in Collective Households Without Preference Similarity Restrictions

  Staff Working Paper 2017-45 Geoffrey R. Dunbar, Arthur Lewbel, Krishna Pendakur

  Resource shares, defined as the fraction of total household spending going to each person in a household, are important for assessing individual material well-being, inequality and poverty. They are difficult to identify because consumption is measured typically at the household level, and many goods are jointly consumed, so that individual-level consumption in multi-person households is not directly observed.

  Content Type(s): Staff research, Staff working papers Topic(s): Domestic demand and components, Econometric and statistical methods JEL Code(s): C, C3, C31, D, D1, D11, D12, D13, I, I3, I32

• The Mode is the Message: Using Predata as Exclusion Restrictions to Evaluate Survey Design

  Staff Working Paper 2017-43 Heng Chen, Geoffrey R. Dunbar, Rallye Shen

  Changes in survey mode (e.g., online, offline) may influence the values of survey responses, and may be particularly problematic when comparing repeated cross-sectional surveys.

  Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods JEL Code(s): C, C8