Staff research

How do firms change their employment decisions when tax benefits for low-earning workers are expanded? Some firms increase employment overall, whereas others replace high-earning workers with low-earning workers, according to German linked employer-employee data.

The TSX index rose by 9.5 percent in November 2020, adding large gains to an already sharp V-shaped recovery. The economic outlook improved at that time as well. We ask whether the stock market gains since last autumn are due to improving forecasts of firms’ earnings.

Solving macroeconomic models is difficult. One challenge is the occasionally binding constraint of the zero lower bound on nominal interest rates. This paper reviews various ways to solve models that include this feature.

The Canadian non-bank financial intermediation (NBFI) sector saw strong growth in 2018 and 2019. In 2020, COVID‑19 caused a financial shock. We provide a preliminary analysis on the impact of COVID‑19 on the sector as well as an update on its growth.

We investigate the economic forces behind the secular decline in bond yields. Before the anchoring of inflation in the mid-1990s, nominal shocks drove inflation, output and bond yields. Afterward, the impacts of nominal shocks were much less significant.

During the COVID-19 pandemic, Canadian financial institutions offered debt-relief programs to help borrowers cope with job losses and economic insecurity. We consider the low take-up rates for these programs and suggest that to be effective, such programs must be visible and easy to use.

This paper surveys and summarizes the literature on how fiscal policy and monetary policy can complement each other in stabilizing economic activity.

How do banks adjust their loan rate markup in response to macroeconomic shocks?

Models with default options are hard to solve. We propose an extension of the endogenous grid method that solves default risk models more efficiently and accurately.

Many central banks are considering issuing a central bank digital currency (CBDC). This would introduce a new policy tool—interest on CBDC. We investigate how this new tool would interact with traditional monetary policy tools, such as the interest on central bank reserves.