COVID-19’s impact on the financial health of Canadian businesses: An initial assessment Staff Analytical Note 2021-8 Timothy Grieder, Mikael Khan, Juan Ortega, Callie Symmers Despite COVID-19 challenges, bold policy measures in Canada have helped businesses manage cash flow pressures and kept insolvency filings low. But the impact of the pandemic has been uneven, and the financial health of some firms may further deteriorate over the next year. Content Type(s): Staff research, Staff analytical notes Research Topic(s): Coronavirus disease (COVID-19), Credit and credit aggregates, Financial stability, Firm dynamics, Recent economic and financial developments, Sectoral balance sheet JEL Code(s): G, G3, G31, G32, G33, G38
Optimal Monetary and Macroprudential Policies Staff Working Paper 2021-21 Josef Schroth Optimal coordination of monetary and macroprudential policies implies higher risk weights on (safe) bonds any time that banks are required to hold additional capital buffers. Coordination also implies a somewhat tighter monetary-policy stance whenever such capital buffers are released. Content Type(s): Staff research, Staff working papers Research Topic(s): Credit and credit aggregates, Financial stability, Financial system regulation and policies, Inflation targets, Monetary policy JEL Code(s): E, E4, E44, E6, E60, G, G2, G21, G28
Behaviour in the Canadian large-value payment system: COVID-19 vs. the global financial crisis Staff Analytical Note 2021-7 Alexander Chaudhry, Anneke Kosse, Karen Sondergard Unlike the 2008–09 global financial crisis, the onset of the COVID-19 crisis did not raise stress levels in Canada’s Large Value Transfer System. Swift changes to the Bank of Canada’s collateral policy and its large-scale asset purchase programs likely eased liquidity pressures in the system. Content Type(s): Staff research, Staff analytical notes Research Topic(s): Coronavirus disease (COVID-19), Financial institutions, Financial stability, Payment clearing and settlement systems JEL Code(s): E, E4, E42, E5, E51, E58, E6, E65
April 30, 2021 Research Update - April 2021 This monthly newsletter features the latest research publications by Bank of Canada economists including external publications and working papers published on the Bank of Canada’s website. Content Type(s): Staff research, Research newsletters
Four Decades of Canadian Earnings Inequality and Dynamics Across Workers and Firms Staff Working Paper 2021-20 Audra Bowlus, Émilien Gouin-Bonenfant, Huju Liu, Lance Lochner, Youngmin Park We use four decades of Canadian matched employer-employee data to explore how inequality and the dynamics of individual earnings have evolved over time in Canada. We also examine how the earnings growth of individuals is related to the growth of their employers. Content Type(s): Staff research, Staff working papers Research Topic(s): Econometric and statistical methods, Firm dynamics, Labour markets, Potential output, Productivity JEL Code(s): D, D2, D22, D3, D31, E, E2, E24, J, J2, J24, J3, J31, J6, J63
Payments on Digital Platforms: Resiliency, Interoperability and Welfare Staff Working Paper 2021-19 Jonathan Chiu, Tsz-Nga Wong This paper studies the business model choice between running a cash platform and a token platform, as well as its welfare and policy implications. Content Type(s): Staff research, Staff working papers Research Topic(s): Digital currencies and fintech, Monetary policy, Payment clearing and settlement systems JEL Code(s): E, E4, E5, L, L5
Potential output and the neutral rate in Canada: 2021 update Staff Analytical Note 2021-6 Dany Brouillette, Guyllaume Faucher, Martin Kuncl, Austin McWhirter, Youngmin Park We expect potential output growth to be higher than in the October 2020 reassessment. By 2024, growth will be slightly above its average growth from 2010 to 2019. We assess that the Canadian nominal neutral rate continues to lie in the range of 1.75 to 2.75 percent. Content Type(s): Staff research, Staff analytical notes Research Topic(s): Economic models, Interest rates, Labour markets, Monetary policy, Potential output, Productivity JEL Code(s): E, E2, E23, E24, E3, E37, E4, E43, E5, E52
Assessing global potential output growth and the US neutral rate: April 2021 Staff Analytical Note 2021-5 Thomas J. Carter, Xin Scott Chen, Ali Jaffery, Christopher Hajzler, Jonathan Lachaine, Peter Shannon, Subrata Sarker, Graeme Westwood, Beiling Yan We expect global potential output growth to rise to 3 percent by 2022. Relative to the last assessment in October 2020, potential output growth has been revised up across all the regions. The range of the US neutral rate remains unchanged relative to the autumn 2020 assessment. Content Type(s): Staff research, Staff analytical notes Research Topic(s): Interest rates, Monetary policy, Potential output, Productivity JEL Code(s): E, E1, E2, E4, E5, F, F0, O, O4
Adoption of Digital Technologies: Insights from a Global Survey Initiative Staff Discussion Paper 2021-7 James Fudurich, Lena Suchanek, Lise Pichette Firms are at the forefront of adopting new technology. Using survey data from a global network of central banks, we assess the effects of digitalization on firms’ pricing and employment decisions. Content Type(s): Staff research, Staff discussion papers Research Topic(s): Firm dynamics, Inflation and prices, Labour markets JEL Code(s): D, D2, D22, E, E3, E31, J, J2, J21, O, O3, O33
Update on housing market imbalances and household indebtedness Staff Analytical Note 2021-4 Mikael Khan, Olga Bilyk, Matthew Ackman 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. Content Type(s): Staff research, Staff analytical notes Research Topic(s): Coronavirus disease (COVID-19), Credit and credit aggregates, Financial stability, Housing, Recent economic and financial developments, Sectoral balance sheet JEL Code(s): D, D1, D14, D8, D84, E, E5, G, G2, G21, G28, R, R2, R21