C3 - Multiple or Simultaneous Equation Models; Multiple Variables

• How Do Interest Rates Spur the Housing Market: Exploring Nonlinear Effects

  Staff analytical paper 2026-35 Benjamin Straus, Stéphane Surprenant, Kerem Tuzcuoglu

  In this note we examine how monetary policy affects housing demand, supply and prices in Canada, and whether these effects vary with labour market conditions

  Content Type(s): Staff research, Staff analytical paper JEL Code(s): C, C3, C32, E, E5, E52, R, R3, R31 Research Theme(s): Monetary policy, Monetary policy framework and transmission

• Balancing Act: Monetary Policy Responses to Natural Disasters

  Staff working paper 2026-28 Tatjana Dahlhaus, Alexander Ueberfeldt, Malik Shukayev

  Natural disasters can create important challenges for monetary policy in resource-rich small open economies. Using a DSGE model calibrated to Canada, we show that most disasters operate as adverse supply shocks, lowering output and raising inflation, thereby creating a trade-off for monetary policy.

  Content Type(s): Staff research, Staff working papers JEL Code(s): C, C1, C11, C3, C32, D, D6, D63, E, E5, E52, Q, Q5, Q54 Research Theme(s): Models and tools, Economic models, Monetary policy, Monetary policy framework and transmission, Structural challenges, Climate change

• Monte Carlo Likelihood-Ratio Tests for Markov Switching Models

  Staff working paper 2026-23 Gabriel Rodriguez Rondon, Jean-Marie Dufour

  This paper develops Monte Carlo likelihood-ratio tests for determining the number of regimes in Markov switching models. Unlike most existing procedures, which focus on testing one versus two regimes, the proposed methods allow testing an arbitrary number of regimes. They are valid in finite samples, robust to identification problems, and applicable to nonstationary, multivariate, and Markov switching GARCH models.

  Content Type(s): Staff research, Staff working papers JEL Code(s): C, C1, C12, C15, C2, C22, C3, C32, C4, C46, C5, C52, E, E3, E32 Research Theme(s): Models and tools, Econometric, statistical and computational methods, Economic models, Monetary policy, Real economy and forecasting

• Climate Change and Socio-economic inequality in the US

  Staff working paper 2026-16 Barbara Sadaba, Tatjana Dahlhaus

  This paper examines how climate change affects income inequality across US states. Using a new climate-inequality VAR and a century of daily temperature data, it shows that shifts across the full temperature distribution—not just average warming—have diverse effects on within-state inequality.

  Content Type(s): Staff research, Staff working papers JEL Code(s): C, C1, C11, C3, C32, D, D6, D63, Q, Q5, Q54 Research Theme(s): Models and tools, Econometric, statistical and computational methods, Structural challenges, Climate change

• Do Monetary Policy Shocks Affect the Neutral Rate of Interest?

  Staff working paper 2026-6 Danilo Leiva-Leon, Rodrigo Sekkel, Luis Uzeda

  Can monetary policy influence the neutral real interest rate (r-star)? Using a new statistical model, we show that interest rate hikes tend to lower r-star and long-run growth, but that monetary policy explains only a small share of the long-run decline in r-star.

  Content Type(s): Staff research, Staff working papers JEL Code(s): C, C3, C32, C5, C51, E, E3, E32, E4, E44 Research Theme(s): Models and tools, Econometric, statistical and computational methods, Monetary policy, Monetary policy framework and transmission, Monetary policy tools and implementation

• A Market-Based Approach to Reverse Stress Testing the Financial System

  Staff working paper 2025-32 Javier Ojea Ferreiro

  This article examines what market conditions lead to extreme losses in global financial systems. Using a reverse stress testing approach, it introduces two measures of systemic risk by starting from the tail losses and working backward to identify the events most closely associated with them.

  Content Type(s): Staff research, Staff working papers JEL Code(s): C, C0, C02, C3, C32, C5, C58, G, G2, G21 Research Theme(s): Financial markets and funds management, Market functioning, Financial system, Financial institutions and intermediation, Financial stability and systemic risk

• Financial Shocks and the Output Growth Distribution

  Staff working paper 2025-25 Francois-Michel Boire, Thibaut Duprey, Alexander Ueberfeldt

  This paper studies how financial shocks shape the distribution of output growth by introducing a quantile-augmented vector autoregression (QAVAR), which integrates quantile regressions into a structural VAR framework. The QAVAR preserves standard shock identification while delivering flexible, nonparametric forecasts of conditional moments and tail risk measures for gross domestic product.

  Content Type(s): Staff research, Staff working papers JEL Code(s): C, C3, C32, C5, C53, E, E3, E32, E4, E44, G, G0, G01 Research Theme(s): Financial system, Financial stability and systemic risk, Models and tools, Econometric, statistical and computational methods, Monetary policy, Real economy and forecasting

• The impact of trading flows on Government of Canada bond prices

  Staff analytical note 2025-20 Andreas Uthemann, Rishi Vala, Jun Yang

  Trading flows affect Government of Canada bond prices. Our estimates suggest a sale of 1% of the available supply of bonds typically lowers bond prices by 0.2%. From 2000 to 2025, demand from institutional investors, such as Canadian pension funds and foreign investors, explains 69% of quarterly price variation, with the remainder explained by changes in the supply of bonds.

  Content Type(s): Staff research, Staff analytical notes JEL Code(s): C, C0, C01, C3, C36, C5, C58, D, D5, D53, E, E6, E62, G, G1, G11, G12, G2, G23 Research Theme(s): Financial markets and funds management, Funds management, Market functioning, Financial system, Financial stability and systemic risk

• Partial Identification of Heteroskedastic Structural Vector Autoregressions: Theory and Bayesian Inference

  Staff working paper 2025-14 Helmut Lütkepohl, Fei Shang, Luis Uzeda, Tomasz Woźniak

  We consider structural vector autoregressions that are identified through stochastic volatility. Our analysis focuses on whether a particular structural shock can be identified through heteroskedasticity without imposing any sign or exclusion restrictions.

  Content Type(s): Staff research, Staff working papers JEL Code(s): C, C1, C11, C12, C3, C32, E, E6, E62 Research Theme(s): Models and tools, Econometric, statistical and computational methods, Economic models, Monetary policy, Real economy and forecasting

• Estimating Discrete Choice Demand Models with Sparse Market-Product Shocks

  Staff working paper 2025-10 Zhentong Lu, Kenichi Shimizu

  We propose a novel approach to estimating consumer demand for differentiated products. We eliminate the need for instrumental variables by assuming demand shocks are sparse. Our empirical applications reveal strong evidence of sparsity in real-world datasets.

  Content Type(s): Staff research, Staff working papers JEL Code(s): C, C1, C3, D, D1, L, L0, L00 Research Theme(s): Financial markets and funds management, Market structure, Models and tools, Econometric, statistical and computational methods