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Effects of macroprudential policy announcements on perceptions of systemic risks

We introduce a history of macroprudential policy (MPP) events in Canada since the 1980s. We document the short-run effects of MPP announcements on market-based measures of systemic risk and find that MPPs can influence the market’s perception of large banks’ resilience.

Exploring the drivers of the real term premium in Canada

Staff Analytical Note 2025-3 Zabi Tarshi, Gitanjali Kumar
Changes in the term premium can reflect uncertainty about inflation, growth and monetary policy. Understanding the key factors that influence the term premium is important when central banks make decisions about monetary policy. In this paper, we derive the real term premium from the nominal term premium in Canada.

Monetary policy, interest rates and the Canadian dollar

Changes in domestic interest rates affect the value of the Canadian dollar less than changes in the risk premium do. These variations often occur when a broad shift in risk sentiment occurs in global markets. Ultimately, the value of the currency reflects long-term, slow-moving features of the economies.

Anchored Inflation Expectations: What Recent Data Reveal

Staff Working Paper 2025-5 Olena Kostyshyna, Isabelle Salle, Hung Truong
We analyze micro-level data from the Canadian Survey of Consumer Expectations through the lens of a heterogeneous-expectations model to study how inflation expectations form over the business cycle. We provide new insights into how households form expectations, documenting that forecasting behaviours, attention and noise in beliefs vary across socio-demographic groups and correlate with views about monetary policy.
Content Type(s): Staff research, Staff working papers Topic(s): Inflation and prices JEL Code(s): D, D8, D84, E, E3, E31, E7, E70

Quantile VARs and Macroeconomic Risk Forecasting

Staff Working Paper 2025-4 Stéphane Surprenant
This paper provides an extensive evaluation of the performance of quantile vector autoregression (QVAR) to forecast macroeconomic risk. Generally, QVAR outperforms standard benchmark models. Moreover, QVAR and QVAR augmented with factors perform equally well. Both are adequate for modeling macroeconomic risks.
Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles JEL Code(s): C, C5, C53, C55, E, E3, E37

Tech Reluctance: Fostering Empathy for Canadians Facing Challenges with Digital Systems

We find that individuals who require help performing banking tasks or who are reluctant to adopt technology avoid digital payment systems they expect to lack usability. Addressing these issues through standard accessibility practices, live assistance and thoughtful interface design can enhance user interaction and trust.

Differentiable, Filter Free Bayesian Estimation of DSGE Models Using Mixture Density Networks

Staff Working Paper 2025-3 Chris Naubert
I develop a method for Bayesian estimation of globally solved, non-linear macroeconomic models. The method uses a mixture density network to approximate the initial state distribution. The mixture density network results in more reliable posterior inference compared with the case when the initial states are set to their steady-state values.

Non-Bank Dealing and Liquidity Bifurcation in Fixed-Income Markets

Staff Working Paper 2025-2 Michael Brolley, David Cimon
We model non-bank entry into fixed-income markets and state-dependent liquidity. Non-bank financial institutions improve liquidity more during normal times than in stress. Banks may become less reliable to marginal clients, exacerbating the difference in liquidity between normal and stressed times. Central bank lending during stress may limit this harmful division.

The International Exposure of the Canadian Banking System

In 2023, the share of Canadian banks’ foreign assets and liabilities amounted to around 50%. While Canadian banks engage domestically mostly with households and non-financial corporations, their most common counterparties abroad are non-bank financial institutions.
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