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373
result(s)
Estimating the Appropriate Quantity of Settlement Balances in a Floor System
Staff Discussion Paper 2023-26
Narayan Bulusu,
Matthew McNeely,
Kaetlynd McRae,
Jonathan Witmer
This paper presents two complementary approaches to estimating the appropriate quantity of settlement balances needed to effectively operate monetary policy under a floor system in Canada.
Content Type(s):
Staff research,
Staff discussion papers
Topic(s):
Financial institutions,
Financial markets,
Financial system regulation and policies,
Monetary policy implementation,
Payment clearing and settlement systems
JEL Code(s):
E,
E4,
E41,
E42,
E5,
E52,
E58,
G,
G2,
G21,
G28
Predicting Changes in Canadian Housing Markets with Machine Learning
Staff Discussion Paper 2023-21
Johan Brannlund,
Helen Lao,
Maureen MacIsaac,
Jing Yang
We apply two machine learning algorithms to forecast monthly growth of house prices and existing homes sales in Canada. Although the algorithms can sometimes outperform a linear model, the improvement in forecast accuracy is not always statistically significant.
Content Type(s):
Staff research,
Staff discussion papers
Topic(s):
Econometric and statistical methods,
Financial markets,
Housing
JEL Code(s):
A,
C,
C4,
C45,
C5,
C53,
D,
D2,
R,
R2,
R3
Tattle-tails: Gauging downside risks using option prices
Staff Analytical Note 2023-13
Greg Adams,
Maksym Tupis
Options markets offer unique insights into the changing risks different assets face, which helps us better understand the broader risks to the Canadian economy. We show how option prices help reveal that investors did not anticipate large downside risks to either major Canadian banks or economic growth during the March 2023 financial sector system stress, a period when policy-makers and investors were unsure of what the future held for Canada’s economy.
Content Type(s):
Staff research,
Staff analytical notes
Topic(s):
Financial markets,
Monetary policy and uncertainty,
Recent economic and financial developments
JEL Code(s):
E,
E4,
E44,
E5,
E52
Do hedge funds support liquidity in the Government of Canada bond market?
Staff Analytical Note 2023-11
Jabir Sandhu,
Rishi Vala
While Government of Canada bond transactions of hedge funds are typically in the opposite direction to those of other market participants, during the peak period of market turmoil in March 2020, hedge funds sold these bonds, just as other market participants did. This shows that hedge funds can at times contribute to one-sided markets and amplify declines in market liquidity.
Content Type(s):
Staff research,
Staff analytical notes
Topic(s):
Coronavirus disease (COVID-19),
Financial markets,
Financial stability,
Market structure and pricing
JEL Code(s):
D,
D4,
D47,
D5,
D53,
G,
G1,
G12,
G14,
G2,
G23
It takes a panel to predict the future: What the stock market says about future economic growth in Canada
Staff Analytical Note 2023-9
Greg Adams,
Jean-Sébastien Fontaine
Valuation ratios in the Canadian stock market can help reveal investors’ expectations about future economic growth because the impact of economic growth on valuation ratios can vary across industries. We find that this variation helps produce accurate forecasts of future growth of real gross domestic product in Canada. The forecasts from our model declined by just over 3 percentage points between January 2022 and February 2023—a period when the Bank of Canada rapidly increased the overnight rate. As well, we find that interest-rate-sensitive industries had an outsized contribution to this expected slowdown in growth.
Content Type(s):
Staff research,
Staff analytical notes
Topic(s):
Asset pricing,
Financial markets,
Monetary policy transmission
JEL Code(s):
E,
E4,
E44,
E47,
E5,
E52
Crowdfunding and Risk
Staff Working Paper 2023-28
David Cimon
Crowdfunding may enable unique products to reach the consumer market. I model a crowdfunding technology that publicly screens consumer demand early in the production process. In this model, entrepreneurs like crowdfunding for risky projects where demand is uncertain, but not for large, safe projects or for projects where production costs are uncertain.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Digital currencies and fintech,
Financial markets,
Financial services
JEL Code(s):
G,
G2,
G21,
G24,
G3,
G32
A Review of the Bank of Canada’s Support of Key Financial Markets During the COVID-19 Crisis
Staff Discussion Paper 2023-9
Joshua Fernandes,
Michael Mueller
The COVID-19 pandemic placed unprecedented strain on the global financial system. We describe how the Bank of Canada responded to the rapidly deteriorating liquidity in core Canadian fixed-income markets.
Content Type(s):
Staff research,
Staff discussion papers
Topic(s):
Coronavirus disease (COVID-19),
Financial markets,
Market structure and pricing,
Monetary policy and uncertainty
JEL Code(s):
E,
E4,
E44,
E5,
E58,
G,
G0,
G01
Pricing Indefinitely Lived Assets: Experimental Evidence
Staff Working Paper 2023-25
John Duffy,
Janet Hua Jiang,
Huan Xie
We study the trading of an asset with bankruptcy risk. The traded price of the asset is, on average, 40% of the expected total dividend payments. We investigate which economic models can explain the low traded price.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Asset pricing,
Financial markets
JEL Code(s):
C,
C9,
C91,
C92,
D,
D8,
D81,
G,
G1,
G12
Narrative-Driven Fluctuations in Sentiment: Evidence Linking Traditional and Social Media
Staff Working Paper 2023-23
Alistair Macaulay,
Wenting Song
News media present competing interpretations of what breaking news implies for the macroeconomy. Recent examples include news reporting on high inflation and yield curve inversions. Do these narratives shape macroeconomic sentiment? In this paper, we highlight the importance of narratives using evidence linking traditional media and social media.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Financial markets,
Inflation and prices,
Monetary policy
JEL Code(s):
D,
D8,
D84,
E,
E3,
E32,
E4,
E43,
E44,
E5,
G,
G1