Child Skill Production: Accounting for Parental and Market-Based Time and Goods Investments Staff working paper 2020-36 Elizabeth Caucutt, Lance Lochner, Joseph Mullins, Youngmin Park Can daycare replace parents’ time spent with children? We explore this by using data on how parents spend time and money on children and how this spending is related to their child’s development. Content Type(s): Staff research, Staff working papers JEL Code(s): D, D1, D13, H, H3, H31, J, J2, J22, J24 Research Theme(s): Monetary policy, Real economy and forecasting, Structural challenges, Demographics and labour supply
The Canadian corporate investment gap Staff analytical note 2020-19 Chris D'Souza, Timothy Grieder, Daniel Hyun, Jonathan Witmer Business investment has been lower than expected in Canada and abroad since the financial crisis of 2007–09. This corporate investment gap is mirrored in firms’ other financing decisions, as they have increased cash holdings and dividend payments and decreased issuance of debt and equity. Content Type(s): Staff research, Staff analytical notes JEL Code(s): D, D2, D22, D9, D92, G, G3, G31, G32 Research Theme(s): Monetary policy, Monetary policy framework and transmission, Real economy and forecasting
Is the stock market pricing in a V‑shaped recovery? Staff analytical note 2020-17 James Kyeong Major stock indexes have bounced back from their March 23 trough to about 10 percent below their peaks. However, stocks that are more sensitive to the business cycle have not performed as well during this market rally. This suggests that stock markets are pricing in a slower, shallower economic recovery. Content Type(s): Staff research, Staff analytical notes JEL Code(s): E, E4, E44, G, G1, G12, G14 Research Theme(s): Financial markets and funds management, Market functioning, Monetary policy, Real economy and forecasting
Household indebtedness risks in the wake of COVID‑19 Staff analytical note 2020-8 Olga Bilyk, Anson T. Y. Ho, Mikael Khan, Geneviève Vallée COVID-19 presents challenges for indebted households. We assess these by drawing parallels between pandemics and natural disasters. Taking into account the financial health of the household sector when the pandemic began, we run model simulations to illustrate how payment deferrals and the labour market recovery will affect mortgage defaults. Content Type(s): Staff research, Staff analytical notes JEL Code(s): C, C2, C21, D, D1, D12, D14, E, E2, E24, E27, E6, E62, G, G2, G21, G28, R, R2 Research Theme(s): Financial system, Financial stability and systemic risk, Household and business credit, Monetary policy, Real economy and forecasting
Canadian Financial Stress and Macroeconomic Conditions Staff discussion paper 2020-4 Thibaut Duprey Severe disruptions in the financial markets, as observed during the 2008 global financial crisis or the COVID-19 pandemic, can impair the stability of the entire financial system and worsen macroeconomic downturns. Content Type(s): Staff research, Staff discussion papers JEL Code(s): C, C3, C32, E, E4, E44, G, G0, G01 Research Theme(s): Financial system, Financial stability and systemic risk, Monetary policy, Real economy and forecasting
How Do Mortgage Rate Resets Affect Consumer Spending and Debt Repayment? Evidence from Canadian Consumers Staff working paper 2020-18 Katya Kartashova, Xiaoqing Zhou We study the causal effect of mortgage rate changes on consumer spending, debt repayment and defaults during an expansionary and a contractionary monetary policy episode in Canada. We find asymmetric responses of consumer durable spending, deleveraging and defaults. These findings help us to understand household sector response to interest rate changes. Content Type(s): Staff research, Staff working papers JEL Code(s): D, D1, D12, D14, E, E4, E43, E5, E52, G, G2, G21, R, R3, R31 Research Theme(s): Financial system, Household and business credit, Monetary policy, Monetary policy framework and transmission, Monetary policy tools and implementation, Real economy and forecasting
Identifying Aggregate Shocks with Micro-level Heterogeneity: Financial Shocks and Investment Fluctuation Staff working paper 2020-17 Xing Guo This paper identifies aggregate financial shocks and quantifies their effects on business investment based on an estimated DSGE model with firm-level heterogeneity. On average, financial shocks contribute only 3% of the variation in U.S. public firms’ aggregate investment. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E1, E12, E2, E22, G, G3, G31, G32 Research Theme(s): Financial system, Household and business credit, Models and tools, Economic models, Monetary policy, Monetary policy framework and transmission, Real economy and forecasting
IMPACT: The Bank of Canada’s International Model for Projecting Activity Technical report No. 116 Patrick Blagrave, Claudia Godbout, Justin-Damien Guénette, René Lalonde, Nikita Perevalov We present the structure and features of the International Model for Projecting Activity (IMPACT), a global semi-structural model used to conduct projections and policy analysis at the Bank of Canada. Major blocks of the model are developed based on the rational error correction framework of Kozicki and Tinsley (1999), which allows the model to strike a balance between theoretical structure and empirical performance. Content Type(s): Staff research, Technical reports JEL Code(s): C, C6, C68, E, E2, E27, E3, E37, F, F0, F01, F3, F32, F4, F47 Research Theme(s): Models and tools, Economic models, Monetary policy, Real economy and forecasting, Structural challenges, International trade, finance and competitiveness
Characterizing Breadth in Canadian Economic Activity Staff analytical note 2020-1 Taylor Webley, Carla Valerio, Maureen MacIsaac Real growth in gross domestic product tends to be meaningfully higher when a large share of industries and demand components are growing—that is, when growth is broad across many fronts. Content Type(s): Staff research, Staff analytical notes JEL Code(s): E, E3, E32 Research Theme(s): Models and tools, Economic models, Monetary policy, Real economy and forecasting
On the Evolution of Multiple Jobholding in Canada Staff working paper 2019-49 Olena Kostyshyna, Etienne Lalé The number of workers who hold more than one job (a.k.a. multiple jobholders) has increased recently in Canada. While this seems to echo the view that non-standard work arrangements are becoming pervasive, the increase has in fact been trivial compared with the long-run rise of multiple jobholding that has occurred since the mid-1970s. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E2, E24, J, J2, J21, J22, J6, J60 Research Theme(s): Monetary policy, Real economy and forecasting, Structural challenges, Demographics and labour supply