D - Microeconomics

• How Do Agents Form Macroeconomic Expectations? Evidence from Inflation Uncertainty

  Staff Working Paper 2024-5 Tao Wang

  The uncertainty regarding inflation that is observed in density forecasts of households and professionals helps macroeconomists understand the formation mechanism of inflation expectations. Shocks to inflation take time to be perceived by all agents in the economy, and such rigidity is lower in a high-inflation environment.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Inflation and prices, Monetary policy and uncertainty JEL Code(s): D, D8, D84, E, E3, E31, E7, E71

• The Role of Long-Term Contracting in Business Lending

  Staff Working Paper 2024-2 Phoebe Tian

  This paper examines inefficiencies arising from a lack of long-term contracting in small business lending in China.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions JEL Code(s): D, D8, D83, D86, G, G2, G21, L, L1, L14, L2, L26

• 2022 Methods-of-Payment Survey Report: Cash Use Over 13 Years

  Staff Discussion Paper 2024-1 Christopher Henry, Doina Rusu, Matthew Shimoda

  We present results from the 2022 Methods-of-Payment Survey, including updated payment shares based on a three-day shopping diary. We also assess various factors associated with long-term trends in cash use.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Bank notes, Coronavirus disease (COVID-19), Digital currencies and fintech, Financial services JEL Code(s): D, D8, D83, E, E4, E41

• Communicating Inflation Uncertainty and Household Expectations

  Staff Working Paper 2023-63 Olena Kostyshyna, Luba Petersen

  We examine the value of direct communication to households about inflation and the uncertainty around inflation statistics. All types of information about inflation are effective at immediately managing inflation expectations, with information about outlooks being more effective and relevant than that about recent inflation and Bank targets.

  Content Type(s): Staff research, Staff working papers Topic(s): Central bank research, Credibility, Inflation and prices, Inflation targets, Monetary policy and uncertainty, Monetary policy communications JEL Code(s): C, C9, C93, D, D8, D84, E, E5, E59, E7

• Perceived versus Calibrated Income Risks in Heterogeneous-Agent Consumption Models

  Staff Working Paper 2023-59 Tao Wang

  Perceived income risks reported in a survey of consumer expectations are more heterogeneous and, on average, lower than indirectly calibrated risks based on panel data. They prove to be one explanation for why a large fraction of households hold very little liquid savings and why accumulated wealth is widely unequal across households.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Monetary policy, Monetary policy and uncertainty JEL Code(s): D, D1, D14, E, E2, E21, E7, E71, G, G5, G51

• The impact of higher interest rates on mortgage payments

  Staff Analytical Note 2023-19 Maria teNyenhuis, Adam Su

  We investigate how the increase in interest rates since early 2022 is affecting mortgage payments. By November 2023, less than half of mortgage holders had faced higher payments. Many borrowers will see a sizable increase in payments at renewal, although income growth could help mitigate the impact.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Credit and credit aggregates, Financial institutions, Interest rates, Recent economic and financial developments JEL Code(s): D, D1, E, E4, E5, G, G2, G21

• Supporting the Transition to Net-Zero Emissions: The Evolving Role of Central Banks

  Staff Discussion Paper 2023-31 Karen McGuinness

  While climate change was largely tackled by government policies in the past, central banks are increasingly grappling with the risks climate change poses. They are evaluating their operational policies to reflect these risks and the transition to a net-zero economy. This paper explores the trade-offs and considerations central banks face.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Central bank research, Climate change, Financial markets JEL Code(s): D, D5, D53, E, E5, E58, E6, E63, G, G3, G32, Q, Q5, Q54

• Digitalization: Prices of Goods and Services

  Staff Discussion Paper 2023-27 Vivian Chu, Tatjana Dahlhaus, Christopher Hajzler

  This paper outlines and assesses the various channels through which digitalization can affect prices of goods and services.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Digitalization, Inflation and prices, Market structure and pricing, Monetary policy JEL Code(s): D, D2, E, E3, E31, E5, E52, L, L1, L11

• Intermediary Market Power and Capital Constraints

  Staff Working Paper 2023-51 Jason Allen, Milena Wittwer

  We examine how intermediary capitalization affects asset prices in a framework that allows for intermediary market power. We introduce a model in which capital-constrained intermediaries buy or trade an asset in an imperfectly competitive market, and we show that weaker capital constraints lead to both higher prices and intermediary markups.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Market structure and pricing JEL Code(s): D, D4, D40, D44, G, G1, G12, G18, G2, G20, L, L1, L10

• Predicting Changes in Canadian Housing Markets with Machine Learning

  Staff Discussion Paper 2023-21 Johan Brannlund, Helen Lao, Maureen MacIsaac, Jing Yang

  We apply two machine learning algorithms to forecast monthly growth of house prices and existing homes sales in Canada. Although the algorithms can sometimes outperform a linear model, the improvement in forecast accuracy is not always statistically significant.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Econometric and statistical methods, Financial markets, Housing JEL Code(s): A, C, C4, C45, C5, C53, D, D2, R, R2, R3