Staff research

We construct an alternative scenario in which trend labour input and business investment are stronger than that expected in the Bank of Canada’s base-case projection in the October 2017 Monetary Policy Report.

Since the global financial crisis, core inflation has been persistently below target in most advanced economies. Recently, it has weakened further in several advanced economies despite gradually diminishing slack. This note reviews recent developments in core inflation across advanced economies and identifies distinctive patterns across regions.

The Bank’s internal credit risk assessment abilities are regularly enhanced. In this note, we present a recent innovation that extends the set of market-based indicators used in the credit risk assessment of financial counterparties.

In this note, we find that valuation effects can act as an important stabilizer, strengthening Canada’s net external wealth when its economic outlook worsens relative to that of other countries.

Using a rich data set on government spending forecasts in Japan, we provide new evidence on the effects of unexpected changes in government spending when the nominal interest rate is near the zero lower bound (ZLB).

Since 1997, the Bank of Canada’s regional offices have been conducting the Business Outlook Survey (BOS), a quarterly survey of business conditions. Survey responses are gathered through face-to-face, confidential consultations with a sample of private sector firms representative of the various sectors, firm sizes and regions across Canada.

In this note, we present the Commodities Factor Model (CFM), a dynamic factor model for a large cross-section of energy and non-energy commodity prices. The model decomposes price changes in commodities into a common “global” component, a “block” component confined to subgroups of economically related commodities and an idiosyncratic price shock component.

Stock market fundamentals would not seem to meaningfully predict returns over a shorter-term horizon—instead, I shift focus to severe downside risk (i.e., crashes).

It is commonly believed that the response of the price of corn ethanol (and hence of the price of corn) to shifts in biofuel policies operates in part through market expectations and shifts in storage demand, yet to date it has proved difficult to measure these expectations and to empirically evaluate this view.

This note presents measures of liquidity used by the Bank of Canada to monitor market conditions and discusses recent trends in Government of Canada (GoC) fixed-income market liquidity. Our results indicate that the Bank’s measures have improved since the financial crisis. Furthermore, GoC market liquidity deteriorated following several stressful events: the euro crisis in 2011, the taper tantrum in 2013 and the oil price shock in 2015. In all three cases, the deterioration remained within historical norms and liquidity returned to normal levels afterwards.