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379 result(s)

Liquidity risks at Canadian life insurance companies

Staff Analytical Note 2024-7 Patrick Aldridge, Stephane Gignac, Rishi Vala, Adrian Walton
We examine how life insurers manage liquidity risks created by their business model. We find that Canadian life insurers did not face significant liquidity draws and continued their usual investment behaviour during the COVID-19 crisis and as interest rates increased in 2022.

What has been putting upward pressure on CORRA?

Staff Analytical Note 2024-4 Boran Plong, Neil Maru
From the autumn of 2023 into early 2024, the Canadian Overnight Repo Rate Average (CORRA), a measure of the cost of overnight general collateral Canadian dollar repos, was consistently well above the Bank’s target for the overnight rate. We find that, among several factors, long bond positions that require repo financing are the main driver of the recent upward pressure on CORRA.

Procyclicality in Central Counterparty Margin Models: A Conceptual Tool Kit and the Key Parameters

Staff Discussion Paper 2023-34 Alper Odabasioglu
Regulators need to provide effective procyclicality guidance, and central counterparties must design and calibrate their margin systems and procyclicality frameworks appropriately. To serve these needs, we provide a novel conceptual tool kit. Further, we highlight that the focus should be on the key margin system parameters in determining procyclicality.

Understanding the Systemic Implications of Climate Transition Risk: Applying a Framework Using Canadian Financial System Data

Our study aims to gain insight on financial stability and climate transition risk. We develop a methodological framework that captures the direct effects of a stressful climate transition shock as well as the indirect—or systemic—implications of these direct effects. We apply this framework using data from the Canadian financial system.

Supporting the Transition to Net-Zero Emissions: The Evolving Role of Central Banks

Staff Discussion Paper 2023-31 Karen McGuinness
While climate change was largely tackled by government policies in the past, central banks are increasingly grappling with the risks climate change poses. They are evaluating their operational policies to reflect these risks and the transition to a net-zero economy. This paper explores the trade-offs and considerations central banks face.

Central Bank Crisis Interventions: A Review of the Recent Literature on Potential Costs

Staff Discussion Paper 2023-30 Patrick Aldridge, David Cimon, Rishi Vala
Central banks’ actions to stabilize financial markets and implement monetary policy during crises may come with costs and side effects. We provide a literature review of these costs and discuss measures that may mitigate the negative impacts of crisis actions.

Borrow Now, Pay Even Later: A Quantitative Analysis of Student Debt Payment Plans

Staff Working Paper 2023-54 Michael Boutros, Nuno Clara, Francisco Gomes
We investigate alternative student debt contracts that defer payments and ease the burden of student loans on US households by preserving disposable income early in borrowers’ lives. Our model shows substantial welfare gains from these contracts relative to existing plans and gains similar to the Biden administration's proposals but with a significantly lower cost.

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.

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.

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.
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