Assessing global potential output growth and the US neutral rate: April 2023 Staff analytical note 2023-5 Salma Ahmed, Aviel Avshalumov, Tania Chaar, Eshini Ekanayake, Helen Lao, Louis Poirier, Jenna Rolland-Mills, Argyn Toktamyssov, Lin Xiang We expect global potential output growth to increase from 2.5% in 2022 to 2.8% by 2026. Compared with the April 2022 staff assessment, global potential output growth is marginally slower. The current range for the US neutral rate is 2% to 3%, unchanged from the last annual assessment. Content Type(s): Staff research, Staff analytical notes JEL Code(s): E, E1, E2, E4, E5, F, F0, O, O4 Research Theme(s): Models and tools, Economic models, Monetary policy, Real economy and forecasting, Structural challenges, Demographics and labour supply
What we can learn by linking firms’ reported emissions with their financial data Staff analytical note 2023-4 Matthew Ackman, Timothy Grieder, Callie Symmers, Geneviève Vallée We analyze the financial statements and stock prices of publicly traded firms incorporated in Canada that report greenhouse gas emissions. We find that these firms primarily use equity financing. We also find that equity investors increasingly account for firms’ emissions when making investment decisions but the impact appears small. This suggests that assets exposed to climate change remain at risk of a sudden repricing. Content Type(s): Staff research, Staff analytical notes JEL Code(s): G, G1, G3, Q, Q5 Research Theme(s): Financial system, Financial stability and systemic risk, Structural challenges, Climate change
Firms’ inflation expectations and price-setting behaviour in Canada: Evidence from a business survey Staff analytical note 2023-3 Ramisha Asghar, James Fudurich, Jane Voll Canadian firms’ expectations for high inflation may be influencing their price setting, supporting strong price growth and delays in the transmission of monetary policy. Using data from the Business Outlook Survey, we investigate the reasons behind widespread price growth seen in Canada in 2021 and early 2022. Content Type(s): Staff research, Staff analytical notes JEL Code(s): D, D2, D22, E, E3, E31 Research Theme(s): Monetary policy, Inflation dynamics and pressures, Real economy and forecasting
A central bank digital currency for offline payments Staff analytical note 2023-2 Cyrus Minwalla, John Miedema, Sebastian Hernandez, Alexandra Sutton-Lalani Offline functionality is a key consideration for a potential CBDC. We describe the different types of offline functionality based on their duration outside of network connection—either intermittent (for short periods) or extended (for longer periods). We discuss the advantages and drawbacks of each and consider implications for end-user devices, system resilience and universal accessibility. Content Type(s): Staff research, Staff analytical notes JEL Code(s): E, E4, E42, E5, E51, E58, O, O3, O31 Research Theme(s): Money and payments, Digital assets and fintech, Payment and financial market infrastructures, Retail payments
Introducing the Bank of Canada’s Market Participants Survey Staff analytical note 2023-1 Annick Demers, Tamara Gomes, Stephane Gignac The Market Participants Survey (MPS) gathers financial market participants’ expectations for key macroeconomic and financial variables and for monetary policy. This staff analytical note describes the MPS’s objectives and main features, its process and design, and how Bank of Canada staff use the results. Content Type(s): Staff research, Staff analytical notes JEL Code(s): C, C8, C83, E, E4, E44, E5, E52, E58, G, G1, G12, G14 Research Theme(s): Financial markets and funds management, Market functioning, Monetary policy, Monetary policy framework and transmission, Monetary policy tools and implementation
Potential benefits and key risks of fiat-referenced cryptoassets Staff analytical note 2022-20 Hugh Ding, Natasha Khan, Bena Lands, Cameron MacDonald, Laura Zhao Cryptoassets that reference a national currency (commonly known as stablecoins) aim to peg their value to the reference currency and typically use a reserve of traditional financial assets to maintain the peg. The market value of these fiat-referenced cryptoassets has grown more than thirtyfold between early 2020 and mid-2022. We explore some of their potential benefits and key risks. Content Type(s): Staff research, Staff analytical notes JEL Code(s): E, E4, G, G2, G28, L, O, O3 Research Theme(s): Financial system, Financial stability and systemic risk, Money and payments, Digital assets and fintech, Payment and financial market infrastructures
Variable-rate mortgages with fixed payments: Examining trigger rates Staff analytical note 2022-19 Stephen Murchison, Maria teNyenhuis We estimate the share of variable-rate mortgages with fixed payments that reached the so-called trigger rate—the interest rate at which mortgage payments no longer cover the principal. Amid rising interest rates, this share was close to 50% at the end of October 2022 and could potentially reach 65% in 2023. Content Type(s): Staff research, Staff analytical notes JEL Code(s): D, D1, E, E4, E5, G, G2, G21 Research Theme(s): Financial system, Financial stability and systemic risk, Household and business credit
Canada’s Beveridge curve and the outlook for the labour market Staff analytical note 2022-18 Alexander Lam Canada’s labour market is tight but beginning to ease. Unemployment will likely rise in turn, but the economy can avoid a recessionary surge given current conditions. Higher unemployment would nonetheless be material, especially for those directly impacted. Content Type(s): Staff research, Staff analytical notes JEL Code(s): E, E3, E32, J, J2, J20, J6, J63, J64 Research Theme(s): Monetary policy, Real economy and forecasting, Structural challenges, Demographics and labour supply
Core inflation over the COVID-19 pandemic Staff analytical note 2022-17 Mikael Khan, Elyse Sullivan We assess the usefulness of various measures of core inflation over the COVID-19 pandemic. We find that Cpi-trim and CPI-median provided the best signal of underlying inflation. The favourable performance of these measures stems from their lack of reliance on historical experience, an especially valuable feature in unprecedented times. Content Type(s): Staff research, Staff analytical notes JEL Code(s): C, C1, C18, E, E3, E31 Research Theme(s): Monetary policy, Inflation dynamics and pressures, Monetary policy framework and transmission
Considerations for the allocation of non-default losses by financial market infrastructures Staff analytical note 2022-16 Daniele Costanzo, Radoslav Raykov Non-default losses of financial market infrastructures (FMIs) have gained attention due to their potential impacts on FMIs and FMI participants, and the lack of a common approach to address them. A key question is, who should absorb these losses? Content Type(s): Staff research, Staff analytical notes JEL Code(s): G, G2, G23, G28, G3, G32, G33 Research Theme(s): Financial system, Financial stability and systemic risk, Money and payments, Payment and financial market infrastructures