Potential Output in Canada: 2019 Reassessment Staff Analytical Note 2019-10 Dany Brouillette, Julien Champagne, Carol Khoury, Natalia Kyui, Jeffrey Mollins, Youngmin Park Potential output is expected to grow on average at 1.8 per cent over 2019–21 and at 1.9 per cent in 2022. While the contribution of trend labour input to potential output growth is expected to decrease between 2019 and 2022, the contribution of trend labour productivity is projected to increase. Content Type(s): Staff research, Staff analytical notes Topic(s): Labour markets, Potential output, Productivity JEL Code(s): E, E0, E00, E2, E22, E23, E24, E3, E37, E6
Could Canadian Bond Funds Add Stress to the Financial System? Staff Analytical Note 2019-9 Rohan Arora, Guillaume Bédard-Pagé, Guillaume Ouellet Leblanc, Ryan Shotlander We create a hypothetical scenario to study the role bond funds play in intensifying shocks to the financial system. Using data from 2018 and 2007, we find that bond funds play a larger role now than they did in the past. Content Type(s): Staff research, Staff analytical notes Topic(s): Financial markets, Financial stability JEL Code(s): G, G1, G2, G20, G23
Non-Resident Taxes and the Role of House Price Expectations Staff Analytical Note 2019-8 Mikael Khan, Matthieu Verstraete In recent years, the governments of Ontario and British Columbia have imposed taxes on purchases by non-Canadian residents of residential properties in certain jurisdictions. Content Type(s): Staff research, Staff analytical notes Topic(s): Financial stability, Housing JEL Code(s): D, D8, D84, R, R2, R21
Liquidity Management of Canadian Corporate Bond Mutual Funds: A Machine Learning Approach Staff Analytical Note 2019-7 Rohan Arora, Chen Fan, Guillaume Ouellet Leblanc When redeeming shares for investors, bond fund managers must choose a mix of cash and bond sales to honour their commitments. This note uses machine learning algorithms to uncover new patterns in decisions fund managers make to meet redemptions. Content Type(s): Staff research, Staff analytical notes Topic(s): Financial markets, Financial stability JEL Code(s): G, G1, G2, G20, G23
The Size and Characteristics of Informal (“Gig”) Work in Canada Staff Analytical Note 2019-6 Olena Kostyshyna, Corinne Luu Underlying wage growth has fallen short of what would be consistent with an economy operating with little or no slack. While many factors could explain this weakness, the availability of additional labour resources from informal (“gig”) work—not fully captured in standard measures of employment and hours worked—may play a role. Content Type(s): Staff research, Staff analytical notes Topic(s): Labour markets, Recent economic and financial developments JEL Code(s): E, E2, E24, E26, J, J2, J20, J3, J30, J4
Canada’s Monetary Policy Report: If Text Could Speak, What Would It Say? Staff Analytical Note 2019-5 André Binette, Dmitri Tchebotarev This note analyzes the evolution of the narrative in the Bank of Canada’s Monetary Policy Report (MPR). It presents descriptive statistics on the core text, including length, most frequently used words and readability level—the three Ls. Although each Governor of the Bank of Canada focuses on the macroeconomic events of the day and the mandate of inflation targeting, we observe that the language used in the MPR varies somewhat from one Governor’s tenure to the next. Content Type(s): Staff research, Staff analytical notes Topic(s): Central bank research, Monetary policy JEL Code(s): E, E0, E02, E5, E52
The State of Labour Market Churn in Canada Staff Analytical Note 2019-4 Olena Kostyshyna, Corinne Luu The literature highlights that labour market churn, including job-to-job transitions, is a key element of wage growth. Using microdata from the Labour Force Survey, we compute measures of labour market churn and compare these with pre-crisis averages to assess implications for wage growth. Content Type(s): Staff research, Staff analytical notes Topic(s): Labour markets, Recent economic and financial developments JEL Code(s): E, E2, E24, J, J2, J20, J3, J30, J6, J63
Drivers of Weak Wage Growth in Advanced Economies Staff Analytical Note 2019-3 Anne-Katherine Cormier, Michael Francis, Kristina Hess, Guillaume Poulin-Bellisle Since the global financial crisis, advanced-economy wage growth has been generally low relative to past recoveries, especially after accounting for the evolution of labour market conditions over this period. This paper investigates a variety of potential explanations for this weakness, drawing on findings from the literature as well as analysis of recent labour market data in advanced economies. Content Type(s): Staff research, Staff analytical notes Topic(s): International topics, Labour markets JEL Code(s): E, E3, E31, F, F0, J, J3
Price Caps in Canadian Bond Borrowing Markets Staff Analytical Note 2019-2 Léanne Berger-Soucy, Jean-Sébastien Fontaine, Adrian Walton Price controls, or caps, can lead to shortages, as 1970’s gasoline price controls illustrate. One million trades show that the market for borrowing bonds in Canada has an implicit price cap: traders are willing to pay no more than the overnight interest rate to borrow a bond. This suggests the probability of a shortage increases when interest rates are very low. Content Type(s): Staff research, Staff analytical notes Topic(s): Financial markets JEL Code(s): G, G1, G10, G12
The Secular Decline of Forecasted Interest Rates Staff Analytical Note 2019-1 Bruno Feunou, Jean-Sébastien Fontaine Canadian interest rates show a secular decline since the 1980s. Long-term survey-based forecasts of interest rates also declined, but less so and were more gradual. Our model-based estimates show an endpoint shifting over time in three phases: a decline between 1990 and 1995, a period of stability between 1996 and 2007, and a further decline since 2008. The current endpoint estimate remains clouded with uncertainty; this is an active area of research. Content Type(s): Staff research, Staff analytical notes Topic(s): Financial markets, Interest rates JEL Code(s): E, E4, E43, G, G1, G12