Estimating Large-Dimensional Connectedness Tables: The Great Moderation Through the Lens of Sectoral Spillovers Staff working paper 2021-37 Felix Brunner, Ruben Hipp Understanding the size of sectoral links is crucial to predicting the impact of a crisis on the whole economy. We show that statistical learning techniques substantially outperform traditional estimation techniques when measuring large networks of these links. Content Type(s): Staff research, Staff working papers JEL Code(s): C, C2, C22, C5, C52, E, E2, E23, E27 Research Theme(s): Models and tools, Econometric, statistical and computational methods, Monetary policy, Real economy and forecasting
Exploring the potential benefits of inflation overshooting Staff analytical note 2021-16 Robert Amano, Marc-André Gosselin, Kurt See After a period with the interest rate at the effective lower bound, temporarily overshooting inflation may offer important economic benefits. This may be especially true for vulnerable segments of the population, such as workers with low attachment to the labour force and the long-term unemployed. Content Type(s): Staff research, Staff analytical notes JEL Code(s): E, E3, E31, E5, E52, J, J2, J20 Research Theme(s): Monetary policy, Inflation dynamics and pressures, Monetary policy framework and transmission, Real economy and forecasting
The Anatomy of Sentiment-Driven Fluctuations Staff working paper 2021-33 Sushant Acharya, Jess Benhabib, Zhen Huo We show that changes in sentiment that aren’t related to fundamentals can drive persistent macroeconomic fluctuations even when all economic agents are rational. Changes in sentiment can also affect how fundamental shocks affect macroeconomic outcomes. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E2, E20, E3, E32, F, F4, F44 Research Theme(s): Models and tools, Economic models, Monetary policy, Monetary policy framework and transmission, Real economy and forecasting
Small and smaller: How the economic outlook of small firms relates to size Staff analytical note 2021-14 Chris D'Souza, James Fudurich, Farrukh Suvankulov Firms with fewer than 100 workers employ about 65 percent of the total labour force in Canada. An online survey experiment was conducted with firms of this size in Canada in 2018–19. We compare the responses of small and micro firms to explore how their characteristics and economic outlooks relate to their size. Content Type(s): Staff research, Staff analytical notes JEL Code(s): C, C8, C83, D, D2, D22, E, E3, E32 Research Theme(s): Monetary policy, Real economy and forecasting, Structural challenges, Demographics and labour supply
ToTEM III: The Bank of Canada’s Main DSGE Model for Projection and Policy Analysis Technical report No. 119 Paul Corrigan, Hélène Desgagnés, José Dorich, Vadym Lepetyuk, Wataru Miyamoto, Yang Zhang ToTEM III is the most recent generation of the Bank of Canada’s main dynamic stochastic general equilibrium model for projection and policy analysis. The model helps Bank staff tell clear and coherent stories about the Canadian economy’s current state and future evolution. Content Type(s): Staff research, Technical reports JEL Code(s): E, E1, E17, E2, E20, E3, E30, E4, E40, E5, E50, E6, E62, E65, F, F4, F40, F41, G, G5, G51 Research Theme(s): Models and tools, Economic models, Monetary policy, Monetary policy framework and transmission, Real economy and forecasting
Monetary Policy, Trends in Real Interest Rates and Depressed Demand Staff working paper 2021-27 Paul Beaudry, Césaire Meh Over the last few decades, real interest rates have trended downward. The most common explanation is that this reflects depressed demand due to demographic, technological and other real factors. We explore the claim that these trends may have been amplified by certain features of monetary policy. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E2, E4, E43, E44, E5, E52, E6, E62, E63, H, H3, H6, H63 Research Theme(s): Models and tools, Economic models, Monetary policy, Inflation dynamics and pressures, Monetary policy framework and transmission, Real economy and forecasting
The Geography of Pandemic Containment Staff working paper 2021-26 Elisa Giannone, Nuno Paixão, Xinle Pang Interconnectedness between US states has affected the evolution of the COVID-19 pandemic. We study the optimal containment policies regulating the movement of goods and people within and between states. Content Type(s): Staff research, Staff working papers JEL Code(s): F, F1, H, H0, I, I1, R, R1 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
COVID-19 and Implications for Automation Staff working paper 2021-25 Alex Chernoff, Casey Warman Occupations held by females with mid-level education face the highest risk of accelerated automation as a result of the COVID-19 pandemic. Content Type(s): Staff research, Staff working papers JEL Code(s): I, I1, I14, I2, I24, J, J1, J15, J16, R, R1, R12 Research Theme(s): Monetary policy, Real economy and forecasting, Structural challenges, Demographics and labour supply, Digitalization and productivity
Shaping the future: Policy shocks and the GDP growth distribution Staff working paper 2021-24 Francois-Michel Boire, Thibaut Duprey, Alexander Ueberfeldt Can central bank and government policies impact the risks around the outlook for GDP growth? We find that fiscal stimulus makes strong GDP growth more likely—even more so when monetary policy is constrained—rather than weak GDP growth less likely. Thus, fiscal stimulus should accelerate the recovery phase of the COVID-19 pandemic. Content Type(s): Staff research, Staff working papers JEL Code(s): C, C3, C32, C5, C53, E, E5, E52, E6, E62 Research Theme(s): Models and tools, Econometric, statistical and computational methods, Economic models, Monetary policy, Monetary policy framework and transmission, Real economy and forecasting
Detecting exuberance in house prices across Canadian cities Staff analytical note 2021-9 Ugochi Emenogu, Cars Hommes, Mikael Khan We introduce a model to detect periods of extrapolative house price expectations across Canadian cities. The House Price Exuberance Indicator can be updated on a quarterly basis to support the Bank of Canada’s broader assessment of housing market imbalances. Content Type(s): Staff research, Staff analytical notes JEL Code(s): C, C5, C53, R, R2, R21, R3, R31 Research Theme(s): Financial system, Financial stability and systemic risk, Household and business credit, Models and tools, Economic models, Monetary policy, Real economy and forecasting