Composite Likelihood Estimation of an Autoregressive Panel Probit Model with Random Effects Staff Working Paper 2019-16 Kerem Tuzcuoglu Modeling and estimating persistent discrete data can be challenging. In this paper, we use an autoregressive panel probit model where the autocorrelation in the discrete variable is driven by the autocorrelation in the latent variable. In such a non-linear model, the autocorrelation in an unobserved variable results in an intractable likelihood containing high-dimensional integrals. Content Type(s): Staff research, Staff working papers Research Topic(s): Credit risk management, Econometric and statistical methods, Economic models JEL Code(s): C, C2, C23, C25, C5, C58, G, G2, G24
Disentangling the Factors Driving Housing Resales Staff Analytical Note 2019-12 Mikael Khan, Taylor Webley We use a recently developed model and loan-level microdata to decompose movements in housing resales since 2015. We find that fundamental factors, namely housing affordability and full-time employment, have had offsetting effects on resales over our study period. Content Type(s): Staff research, Staff analytical notes Research Topic(s): Econometric and statistical methods, Financial stability, Financial system regulation and policies, Housing, Recent economic and financial developments JEL Code(s): C, C2, C22, E, E2, R, R2, R21
Firm-level Investment Under Imperfect Capital Markets in Ukraine Staff Working Paper 2019-14 Oleksandr Shcherbakov This paper develops and estimates a model of firm-level fixed capital investment when firms face borrowing constraints. Content Type(s): Staff research, Staff working papers Research Topic(s): Econometric and statistical methods, Economic models, Firm dynamics JEL Code(s): C, C6, C61, C63, D, D2, D24, G, G3, G31
The Trend Unemployment Rate in Canada: Searching for the Unobservable Staff Working Paper 2019-13 Dany Brouillette, Marie-Noëlle Robitaille, Laurence Savoie-Chabot, Pierre St-Amant, Bassirou Gueye, Elise Nelson In this paper, we assess several methods that have been used to measure the Canadian trend unemployment rate (TUR). We also consider improvements and extensions to some existing methods. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Economic models, Inflation and prices, Labour markets JEL Code(s): C, C5, C52, C53, E, E2, E24, E27
Inflation Targeting and Liquidity Traps Under Endogenous Credibility Staff Working Paper 2019-9 Cars Hommes, Joep Lustenhouwer Policy implications are derived for an inflation-targeting central bank, whose credibility is endogenous and depends on its past ability to achieve its targets. This is done in a New Keynesian framework with heterogeneous and boundedly rational expectations. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Credibility, Monetary policy JEL Code(s): C, C6, C62, E, E3, E32, E5, E52
Inference in Games Without Nash Equilibrium: An Application to Restaurants’ Competition in Opening Hours Staff Working Paper 2018-60 Erhao Xie This paper relaxes the Bayesian Nash equilibrium (BNE) assumption commonly imposed in empirical discrete choice games with incomplete information. Instead of assuming that players have unbiased/correct expectations, my model treats a player’s belief about the behavior of other players as an unrestricted unknown function. I study the joint identification of belief and payoff functions. Content Type(s): Staff research, Staff working papers Research Topic(s): Econometric and statistical methods, Market structure and pricing JEL Code(s): C, C5, C57, L, L1, L13, L8, L85
2017 Methods-of-Payment Survey: Sample Calibration and Variance Estimation Technical Report No. 114 Heng Chen, Marie-Hélène Felt, Christopher Henry This technical report describes sampling, weighting and variance estimation for the Bank of Canada’s 2017 Methods-of-Payment Survey. Under quota sampling, a raking ratio method is implemented to generate weights with both post-stratification and nonparametric nonresponse weight adjustments. Content Type(s): Staff research, Technical reports Research Topic(s): Econometric and statistical methods JEL Code(s): C, C8, C81, C83
Fundamental Drivers of Existing Home Sales in Canada Staff Discussion Paper 2018-16 Taylor Webley Existing home sales’ share of Canada’s economic pie has been rising in recent years, and variation around this trend has resulted in outsized contributions to changes in real gross domestic product (GDP). In this context, we use a cointegration framework to estimate the level of resale activity across the Canadian provinces that is supported by fundamentals—namely, full-time employment, housing affordability and migration flows—to help look through the volatility. Content Type(s): Staff research, Staff discussion papers Research Topic(s): Econometric and statistical methods, Economic models, Housing JEL Code(s): C, C2, C22, C23, E, E2, E27, R, R2, R21
GDP by Industry in Real Time: Are Revisions Well Behaved? Staff Analytical Note 2018-40 Patrick Rizzetto The monthly data for real gross domestic product (GDP) by industry are used extensively in real time both to ground the Bank of Canada’s monitoring of economic activity and in the Bank’s nowcasting tools, making these data one of the most important high-frequency time series for Canadian nowcasting. Content Type(s): Staff research, Staff analytical notes Research Topic(s): Business fluctuations and cycles, Central bank research, Econometric and statistical methods JEL Code(s): C, C5, C53, C8, C82, E, E0, E01
Does US or Canadian Macro News Drive Canadian Bond Yields? Staff Analytical Note 2018-38 Bruno Feunou, Rodrigo Sekkel, Morvan Nongni-Donfack We show that a large share of low-frequency (quarterly) movements in Canadian government bond yields can be explained by macroeconomic news, even though high-frequency (daily) changes are driven by other shocks. Furthermore, we show that US macro news—not domestic news— explains most of the quarterly variation in Canadian bond yields. Content Type(s): Staff research, Staff analytical notes Research Topic(s): Financial markets, International topics, Monetary policy JEL Code(s): C, C2, C22, E, E4, E43