Staff research

Using the microdata underlying the Canadian consumer price index, we study how often and by how much firms changed their prices during the COVID-19 pandemic. We find that the surge in inflation was mainly associated with retailers raising prices much more often than before. We also find that more recently, corporate price-setting behaviour appears to be approaching pre-pandemic norms.

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.

We study the relationship between characteristics of new mortgages and borrowers’ financial stress in Canada’s energy-intensive regions following the 2014 collapse in oil prices. We find that borrowers with limited home equity were more likely to have difficulty repaying debt.

Exceptional strength in the housing market during the pandemic is underpinning Canada’s economic recovery. However, two key vulnerabilities—housing market imbalances and elevated household indebtedness—have intensified.

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.

Using new regulatory data on residential secured lending from Canadian banks, we assess the growth rate of home equity lines of credit (HELOCs).

Recent policy changes are having a clear impact on the mortgage market. The number of new, highly indebted borrowers has fallen, and overall mortgage activity has slowed significantly.

In this note, we explore two types of risk faced by holders of mortgages and home equity lines of credit (HELOCs) in the context of rising interest rates: interest rate risk and renewal risk.