E - Macroeconomics and Monetary Economics

• The Market for Acquiring Card Payments from Small and Medium-Sized Canadian Merchants

  Staff Discussion Paper 2020-5 Angelika Welte, Jozsef Molnar

  This note uses industry data and a unique dataset of small and medium-sized merchants to provide insights into the acquirer-merchant market in Canada.

  Content Type(s): Staff research, Staff discussion papers Research Topic(s): Financial services, Market structure and pricing, Payment clearing and settlement systems JEL Code(s): C, C2, D, D2, E, E4, E42

• Household indebtedness risks in the wake of COVID‑19

  Staff Analytical Note 2020-8 Olga Bilyk, Anson T. Y. Ho, Mikael Khan, Geneviève Vallée

  COVID-19 presents challenges for indebted households. We assess these by drawing parallels between pandemics and natural disasters. Taking into account the financial health of the household sector when the pandemic began, we run model simulations to illustrate how payment deferrals and the labour market recovery will affect mortgage defaults.

  Content Type(s): Staff research, Staff analytical notes Research Topic(s): Climate change, Coronavirus disease (COVID-19), Credit and credit aggregates, Econometric and statistical methods, Financial stability, Fiscal policy, Housing, Recent economic and financial developments, Sectoral balance sheet JEL Code(s): C, C2, C21, D, D1, D12, D14, E, E2, E24, E27, E6, E62, G, G2, G21, G28, R, R2

• Canadian Financial Stress and Macroeconomic Conditions

  Staff Discussion Paper 2020-4 Thibaut Duprey

  Severe disruptions in the financial markets, as observed during the 2008 global financial crisis or the COVID-19 pandemic, can impair the stability of the entire financial system and worsen macroeconomic downturns.

  Content Type(s): Staff research, Staff discussion papers Research Topic(s): Central bank research, Coronavirus disease (COVID-19), Financial markets, Financial stability, Monetary and financial indicators JEL Code(s): C, C3, C32, E, E4, E44, G, G0, G01

• How Do Mortgage Rate Resets Affect Consumer Spending and Debt Repayment? Evidence from Canadian Consumers

  Staff Working Paper 2020-18 Katya Kartashova, Xiaoqing Zhou

  We study the causal effect of mortgage rate changes on consumer spending, debt repayment and defaults during an expansionary and a contractionary monetary policy episode in Canada. We find asymmetric responses of consumer durable spending, deleveraging and defaults. These findings help us to understand household sector response to interest rate changes.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Credit and credit aggregates, Interest rates, Monetary policy, Monetary policy transmission JEL Code(s): D, D1, D12, D14, E, E4, E43, E5, E52, G, G2, G21, R, R3, R31

• Scenario Analysis and the Economic and Financial Risks from Climate Change

  Staff Discussion Paper 2020-3 Erik Ens, Craig Johnston

  This paper adapts climate-economy models that have been applied in other contexts for use in climate-related scenario analysis. We consider illustrative scenarios for the global economy that could generate economic and financial risks. Our results suggest there are significant economic risks from climate change and the move to a low-carbon economy.

  Content Type(s): Staff research, Staff discussion papers Research Topic(s): Climate change, Economic models, Financial stability, International topics JEL Code(s): C, C6, C68, D, D5, D58, E, E5, E50, O, O4, O44, P, P1, P18, Q, Q4, Q5, Q54, Q55

• Identifying Aggregate Shocks with Micro-level Heterogeneity: Financial Shocks and Investment Fluctuation

  Staff Working Paper 2020-17 Xing Guo

  This paper identifies aggregate financial shocks and quantifies their effects on business investment based on an estimated DSGE model with firm-level heterogeneity. On average, financial shocks contribute only 3% of the variation in U.S. public firms’ aggregate investment.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Firm dynamics JEL Code(s): E, E1, E12, E2, E22, G, G3, G31, G32

• Endogenous Time Variation in Vector Autoregressions

  Staff Working Paper 2020-16 Danilo Leiva-Leon, Luis Uzeda

  We introduce a new class of time-varying parameter vector autoregressions (TVP-VARs) where the identified structural innovations are allowed to influence — contemporaneously and with a lag — the dynamics of the intercept and autoregressive coefficients in these models.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Econometric and statistical methods, Inflation and prices, Monetary policy transmission JEL Code(s): C, C1, C11, C3, C32, E, E3, E31, E5, E52

• Is Central Bank Currency Fundamental to the Monetary System?

  Staff Discussion Paper 2020-2 Hanna Armelius, Carl Andreas Claussen, Scott Hendry

  In this paper, we discuss whether the ability of individuals to convert commercial bank money (i.e., bank deposits) into central bank money is fundamentally important for the monetary system.

  Content Type(s): Staff research, Staff discussion papers Research Topic(s): Bank notes, Digital currencies and fintech, Financial services, Payment clearing and settlement systems JEL Code(s): E, E4, E41, E42, E5

• Learning, Equilibrium Trend, Cycle, and Spread in Bond Yields

  Staff Working Paper 2020-14 Guihai Zhao

  This equilibrium model explains the trend in long-term yields and business-cycle movements in short-term yields and yield spreads. The less-frequent inverted yield curves (and less-frequent recessions) after the 1990s are due to recent secular stagnation and procyclical inflation expectations.

  Content Type(s): Staff research, Staff working papers Research Topic(s): Asset pricing, Financial markets, Interest rates JEL Code(s): E, E4, E43, G, G0, G00, G1, G12

• Interest Rate Uncertainty as a Policy Tool

  Staff Working Paper 2020-13 Fabio Ghironi, Galip Kemal Ozhan

  We study a novel policy tool—interest rate uncertainty—that can be used to discourage inefficient capital inflows and to adjust the composition of external account between shortterm securities and foreign direct investment (FDI).

  Content Type(s): Staff research, Staff working papers Research Topic(s): International financial markets, Monetary policy and uncertainty, Monetary policy framework JEL Code(s): E, E3, E32, F, F2, F21, F3, F32, G, G1, G15