United in Booms, Divided in Busts: Regional House Price Cycles and Monetary Policy Staff Working Paper 2025-36 Ulrich Roschitsch, Hannes Twieling This paper shows that regional disparities in house price growth are more pronounced during house price busts than during booms. To explain this observation we construct a two-region currency union model incorporating a housing sector and extrapolative belief updating regarding house prices. To solve the model, we propose a new method that efficiently handles extrapolative belief updating in a wide class of structural models. Content Type(s): Staff research, Staff working papers Research Topic(s): Housing, Monetary policy, Monetary policy transmission JEL Code(s): E, E3, E31, E32, E5, E52, F, F4, F45
Money Talks: How Foreign and Domestic Monetary Policy Communications Move Financial Markets Staff Working Paper 2025-33 Rodrigo Sekkel, Henry Stern, Xu Zhang We construct a dataset on Federal Reserve and Bank of Canada non-rate announcement events to provide novel insights into how foreign and domestic monetary policy communications affect the financial markets of open economies. We find that Fed non-rate communications have a stronger impact on long-term interest rates and stock futures, while Bank of Canada communications are relatively more important for short-term interest rates and the exchange rate. Content Type(s): Staff research, Staff working papers Research Topic(s): Asset pricing, Central bank research, Exchange rates, Financial markets, Interest rates, International financial markets, Monetary policy JEL Code(s): E, E5, E52, F, F3, F31, G, G1, G15
Demand-Driven Risk Premia in Foreign Exchange and Bond Markets Staff Working Paper 2025-29 Ingomar Krohn, Andreas Uthemann, Rishi Vala, Jun Yang We show how Treasury demand shocks transmit to foreign exchange and bond markets globally. Higher Treasury demand weakens the U.S. dollar and raises foreign bond prices, with effects persisting for two weeks. The transmission varies predictably across countries based on their monetary policy alignment with the United States. Content Type(s): Staff research, Staff working papers Research Topic(s): Asset pricing, Exchange rates, Interest rates, International financial markets, Market structure and pricing JEL Code(s): F, F3, F30, F31, G, G1, G12, G15
Risk Scenarios and Macroeconomic Forecasts Staff Working Paper 2025-28 Kevin Moran, Dalibor Stevanovic, Stéphane Surprenant We produce forecasts for four risk scenarios to consider their usefulness for monitoring the Canadian economy. We find a high-oil-price scenario benefits the economy, a US recession induces a slowdown, a tight labor market leads to price increases, and a restrictive monetary policy scenario increases the unemployment rate while lowering the inflation rate. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Econometric and statistical methods, Monetary policy JEL Code(s): E, E3, E32, F, F4, F41, F44
BoC–BoE Sovereign Default Database: What’s new in 2025? Staff Analytical Note 2025-24 David Beers, Obiageri Ndukwe, Joe Berry The BoC–BoE database of sovereign debt defaults, published and updated annually by the Bank of Canada and the Bank of England, provides comprehensive estimates of stocks of government obligations in default. The 2025 edition highlights a decline in the US-dollar value of sovereign debt in default and provides more data about defaults on China’s official loans. Content Type(s): Staff research, Staff analytical notes Research Topic(s): Debt management, Development economics, Financial stability, International financial markets JEL Code(s): F, F3, F34, G, G1, G10, G14, G15
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 Research Topic(s): Business fluctuations and cycles, International topics JEL Code(s): E, E2, E23, F, F3, F4, Q, Q3, Q33
Assessing tariff pass-through to consumer prices in Canada: Lessons from 2018 Staff Analytical Note 2025-18 Alexander Lam US trade protectionism is making the economic outlook increasingly uncertain. To assess how consumer prices may respond to tariffs, we examine a tariff episode from 2018 using detailed microdata and the synthetic control method. Content Type(s): Staff research, Staff analytical notes Research Topic(s): Inflation and prices, International topics, Recent economic and financial developments, Trade integration JEL Code(s): E, E3, E30, E31, F, F1, F10, F13, F14
Assessing the US and Canadian neutral rates: 2025 update Staff Analytical Note 2025-16 Frida Adjalala, Felipe Alves, William Beaudoin, Hélène Desgagnés, Wei Dong, Ingomar Krohn, Jan David Schneider We assess both the US and Canadian nominal neutral rates to be in the range of 2.25% to 3.25%, unchanged from the range assessed in 2024. Content Type(s): Staff research, Staff analytical notes Research Topic(s): Economic models, Interest rates, Monetary policy JEL Code(s): E, E4, E40, E43, E5, E50, E52, E58, F, F4, F41
Assessing global potential output growth: April 2025 Staff Analytical Note 2025-15 Samuel Boulanger, Raheeb Dastagir, Daniel de Munnik, Eshini Ekanayake, Kun Mo, Walter Muiruri, Faiza Noor, Sabreena Obaid, Louis Poirier This note presents the annual update of Bank of Canada staff estimates for growth in global potential output. These estimates served as key inputs to the analysis supporting the April 2025 Monetary Policy Report. Content Type(s): Staff research, Staff analytical notes Research Topic(s): Potential output, Productivity JEL Code(s): E, E1, E2, F, F0, F1, O, O3, O33, O4
The Mutable Geography of Firms’ International Trade Staff Working Paper 2025-11 Lu Han Exporters frequently change their market destinations. This paper introduces a new approach to identifying the drivers of these decisions over time. Analysis of customs data from China and the UK shows most changes are driven by demand rather than supply-related shocks. Content Type(s): Staff research, Staff working papers Research Topic(s): Economic models, Firm dynamics, International topics, Trade integration JEL Code(s): F, F1, F12, F14, L, L1, L11