L1 - Market Structure, Firm Strategy, and Market Performance

• Digitalization: Productivity

  Staff discussion paper 2023-17 Jeffrey Mollins, Temel Taskin

  We examine the relationship between digitalization and productivity, the factors that influence this relationship, and how digitalization’s effect on productivity could change firm behaviour.

  Content Type(s): Staff research, Staff discussion papers JEL Code(s): E, E2, L, L1, L11, O, O4, O47, O5, O51 Research Theme(s): Structural challenges, Digitalization and productivity

• Flagship Entry in Online Marketplaces

  Staff working paper 2023-41 Ginger Zhe Jin, Zhentong Lu, Xiaolu Zhou, Lu Fang

  In this paper, we empirically study how flagship entry in an online marketplace affects consumers, the platform, and various sellers on the platform. We find flagship entry may benefit consumers by expanding the choice set, by intensifying price competition within the entry brand, and by improving consumer perception for parts of the platform.

  Content Type(s): Staff research, Staff working papers JEL Code(s): D, D4, L, L1, L8 Research Theme(s): Financial markets and funds management, Market structure, Structural challenges, Digitalization and productivity

• The contribution of firm profits to the recent rise in inflation

  Staff analytical note 2023-12 Panagiotis Bouras, Christian Bustamante, Xing Guo, Jacob Short

  We measure the contribution to inflation from the growth in markups of Canadian firms. The dynamics of inflation and markups suggest that changes in markups could account for less than one-tenth of inflation in 2021. Further, they suggest that peak inflation was driven primarily by changes in the costs of firms.

  Content Type(s): Staff research, Staff analytical notes JEL Code(s): D, D2, D22, D4, E, E3, E31, L, L1, L11 Research Theme(s): Financial markets and funds management, Market functioning, Monetary policy, Inflation dynamics and pressures

• Markups and inflation during the COVID-19 pandemic

  Staff analytical note 2023-8 Olga Bilyk, Timothy Grieder, Mikael Khan

  We find that prices and costs for consumer-oriented firms moved roughly one-for-one during the COVID-19 pandemic. This means firms fully passed rising costs through to the prices they charged. However, our results are suggestive, given data limitations and the uncertainty associated with estimating markups.

  Content Type(s): Staff research, Staff analytical notes JEL Code(s): D, D2, D4, E, E2, E3, L, L1 Research Theme(s): Monetary policy, Inflation dynamics and pressures, Real economy and forecasting

• Cost Pass-Through with Capacity Constraints and International Linkages

  Staff working paper 2023-16 Reinhard Ellwanger, Hinnerk Gnutzmann, Piotr Śpiewanowski

  How are regional cost shocks passed through into global prices? We investigate the role of short-run capacity constraints and show that they can induce stark non-linearities in the pass-through. We highlight this effect for the market for ammonia, a commodity produced largely from natural gas.

  Content Type(s): Staff research, Staff working papers JEL Code(s): L, L1, L13, L6, L65, Q, Q4, Q40, Q5, Q54 Research Theme(s): Models and tools, Economic models, Monetary policy, Inflation dynamics and pressures, Structural challenges, Climate change, International trade, finance and competitiveness

• PayTech and the D(ata) N(etwork) A(ctivities) of BigTech Platforms

  Staff working paper 2022-35 Jonathan Chiu, Thorsten Koeppl

  Why do BigTech platforms introduce payment services? We explore this using a model in which a monopoly platform faces a trade-off between the costs associated with privacy concerns and the revenue from data services. We then analyze the feedback effects between data and payments.

  Content Type(s): Staff research, Staff working papers JEL Code(s): D, D8, E, E4, E42, L, L1 Research Theme(s): Financial markets and funds management, Market functioning, Money and payments, Digital assets and fintech, Payment and financial market infrastructures, Retail payments

• Fixed-income dealing and central bank interventions

  Staff analytical note 2022-9 David Cimon, Adrian Walton

  We summarize the theoretical model of central bank asset purchases developed in Cimon and Walton (2022). The model helps us understand how asset purchases ease pressures on investment dealers to restore market conditions in a crisis.

  Content Type(s): Staff research, Staff analytical notes JEL Code(s): G, G1, G10, G2, G20, L, L1, L10 Research Theme(s): Financial markets and funds management, Market functioning, Financial system, Financial institutions and intermediation, Models and tools, Economic models, Monetary policy, Monetary policy tools and implementation

• Equilibrium in Two-Sided Markets for Payments: Consumer Awareness and the Welfare Cost of the Interchange Fee

  Staff working paper 2022-15 Kim Huynh, Gradon Nicholls, Oleksandr Shcherbakov

  We construct and estimate a structural two-stage model of equilibrium in a market for payments in order to quantify the network externalities and identify the main determinants of consumer and merchant decisions.

  Content Type(s): Staff research, Staff working papers JEL Code(s): C, C5, C51, D, D1, D12, E, E4, E42, L, L1, L14 Research Theme(s): Models and tools, Econometric, statistical and computational methods, Money and payments, Payment and financial market infrastructures, Retail payments

• Vertical Bargaining and Obfuscation

  Staff working paper 2022-13 Edona Reshidi

  Is obscuring prices always bad for consumers? The answer depends on the market structure and on the negotiating power between manufacturers and retailers.

  Content Type(s): Staff research, Staff working papers JEL Code(s): C, C7, C70, L, L1, L13, L4, L42 Research Theme(s): Financial markets and funds management, Market structure, Models and tools, Economic models

• Central Bank Liquidity Facilities and Market Making

  Staff working paper 2022-9 David Cimon, Adrian Walton

  We create a theoretical model of central bank asset purchases. The model helps explain how, in a crisis, these purchases ease pressures on investment dealers.

  Content Type(s): Staff research, Staff working papers JEL Code(s): G, G1, G10, G2, G20, L, L1, L10 Research Theme(s): Financial markets and funds management, Market functioning, Financial system, Financial institutions and intermediation, Financial stability and systemic risk, Monetary policy, Monetary policy tools and implementation