Uncovering Subjective Models from Survey Expectations Staff working paper 2025-31 Chenyu Hou, Tao Wang This paper shows that survey expectations can be used to uncover how households subjectively think about inflation and unemployment dynamics jointly. The commonly documented "stagflation view", namely the households' tendency to associate inflation with a worse labor market, implies amplified impacts of supply shocks and dampened ones of demand shocks. Content Type(s): Staff research, Staff working papers JEL Code(s): D, D8, D84, E, E2, E21, E3, E30, E32, E7, E71 Research Theme(s): Models and tools, Econometric, statistical and computational methods, Economic models, Monetary policy, Inflation dynamics and pressures, Real economy and forecasting
Non-homothetic Preferences and the Demand Channel of Inflation Staff working paper 2025-30 Stephen Murchison An alternative to the standard CES aggregator, based on non-homothetic household preferences, is proposed. Specifically, the elasticity of substitution between goods declines during periods of strong per-capita consumption and vice versa, giving firms an incentive to adjust their desired markup in response to the state of demand. Empirical evidence favouring a direct role for per-capita consumption demand in inflation determination for Canada is presented. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E2, E27, E5, E52, Q, Q4, Q43, Q5, Q58 Research Theme(s): Models and tools, Economic models, Monetary policy, Inflation dynamics and pressures
High-Frequency Cross-Sectional Identification of Military News Shocks Staff working paper 2025-27 Francesco Amodeo, Edoardo Briganti We identify and quantify fiscal news shocks, compiling events (2001–2023) that altered the expected path of U.S. defense expenditure. For each event, we estimate market-implied shifts in expected spending. A shift-share analysis yields a two-year, metropolitan statistical area–level GDP multiplier of approximately 1 for U.S. military build-ups. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E2, E20, E3, E30, E32, E6, E60, E62, E65 Research Theme(s): Models and tools, Econometric, statistical and computational methods, Economic models, Monetary policy, Monetary policy framework and transmission, Real economy and forecasting
Household balance sheets and mortgage payment shocks Staff analytical note 2025-23 Thomas Michael Pugh, Saarah Sheikh, Taylor Webley Household savings in Canada have increased significantly since 2019, especially among homeowners without a mortgage. We assess how savings buffers can mitigate households’ financial risk in relation to asset repricing, mortgage payment renewal and unemployment. Content Type(s): Staff research, Staff analytical notes JEL Code(s): D, D3, D31, E, E2, E21, G, G5, G51 Research Theme(s): Financial system, Financial stability and systemic risk, Household and business credit
Credit Conditions, Inflation, and Unemployment Staff working paper 2025-26 Chao Gu, Janet Hua Jiang, Liang Wang We identify two channels that affect the relationship between inflation and unemployment. First, inflation lowers wages because unemployed suffer more from inflation than employed, generating a positive relationship. Second, inflation increases firms’ financing costs, generating a negative relationship. Improvements in firm financing conditions can induce the relationship to switch signs. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E2, E24, E3, E31, E4, E44, E5, E51 Research Theme(s): Financial system, Household and business credit, Models and tools, Economic models, Monetary policy, Inflation dynamics and pressures, Real economy and forecasting
Short-Run and Long-Run News: Evidence from Giant Commodity Discoveries Staff working paper 2025-24 Jean-Paul L’Huillier, Kirill Shakhnov, Laure Simon Our understanding of news shocks is, to a large extent, based on studies that focus empirically on short-run news. This paper brings new insights by analyzing the effects of giant commodity discoveries, which typically materialize over the longer run. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E2, E23, F, F3, F4, Q, Q3, Q33 Research Theme(s): Financial system, Financial stability and systemic risk, Models and tools, Economic models, Monetary policy, Real economy and forecasting, Structural challenges, International trade, finance and competitiveness
Perceived Unemployment Risks over Business Cycles Staff working paper 2025-23 William Du, Adrian Monninger, Xincheng Qiu, Tao Wang Aggregate consumption impacts of heightened job risks during recessions can arise either from ex-ante responses to the fear of unemployment or from ex-post consumption declines due to realized income losses. We use survey-based perceptions of job risk and actual labor market transitions to quantify the relative contributions of these two channels. We further show that belief stickiness limits the extent of ex-ante insurance against job risks. Content Type(s): Staff research, Staff working papers JEL Code(s): D, D1, D14, E, E2, E21, E7, E71, G, G5, G51 Research Theme(s): Monetary policy, Monetary policy framework and transmission, Real economy and forecasting, Structural challenges, Demographics and labour supply
Firm Heterogeneity and Adverse Selection in External Finance: Micro Evidence and Macro Implications Staff working paper 2025-20 Xing Guo, Pablo Ottonello, Thomas Winberry, Toni Whited We develop a heterogeneous firm macro model with private information and quantify the aggregate relevance of asymmetric information. We find that a spike in private information account for 40% of the decline in aggregate investment during the 2007-2009 financial crisis and made monetary stimulus significantly less effective. Content Type(s): Staff research, Staff working papers JEL Code(s): D, D8, D82, E, E2, E22, E3, E32, E5, E52, G, G3, G30 Research Theme(s): Financial system, Financial institutions and intermediation, Household and business credit, Models and tools, Economic models, Monetary policy, Monetary policy framework and transmission
Synthesizing Signals from the Canadian Survey of Consumer Expectations Staff discussion paper 2025-11 Jacob Dolinar, Patrick Sabourin, Matt West We introduce the Canadian Survey of Consumer Expectations indicator. This indicator provides a summary measure of consumer opinions that we can track over time. We construct three underlying sub-indexes—financial health, labour market and consumer spending—that capture different factors influencing consumers’ daily lives. Content Type(s): Staff research, Staff discussion papers JEL Code(s): D, D1, D12, D8, D84, E, E2, E21, E3, E32, E7, E71 Research Theme(s): Models and tools, Economic models, Monetary policy, Inflation dynamics and pressures, Real economy and forecasting, Structural challenges, Demographics and labour supply
Benchmarks for assessing labour market health: 2025 update Staff analytical note 2025-17 Fares Bounajm, Tessa Devakos We provide an update on the state of the labour market, which has moved into modest excess supply. We also explore why wage growth measures remain elevated and how US trade policy could affect different parts of the labour market. We update the range of benchmarks in our dashboard of indicators. Content Type(s): Staff research, Staff analytical notes JEL Code(s): E, E2, J, J2, J3, J6 Research Theme(s): Monetary policy, Inflation dynamics and pressures, Real economy and forecasting, Structural challenges, Demographics and labour supply, International trade, finance and competitiveness