Evaluating the Bank of Canada Staff Economic Projections Using a New Database of Real-Time Data and Forecasts Staff working paper 2018-52 Julien Champagne, Guillaume Poulin-Bellisle, Rodrigo Sekkel We present a novel database of real-time data and forecasts from the Bank of Canada’s staff economic projections. We then provide a forecast evaluation for GDP growth and CPI inflation since 1982: we compare the staff forecasts with those from commonly used time-series models estimated with real-time data and with forecasts from other professional forecasters and provide standard bias tests. Content Type(s): Staff research, Staff working papers JEL Code(s): C, C3, C32, E, E1, E17, E3, E37 Research Theme(s): Models and tools, Economic models, Monetary policy, Inflation dynamics and pressures, Real economy and forecasting
Introducing a Systematic Measure of Idiosyncratic Prices Staff analytical note 2018-33 Madigan Dockrill, Laurence Savoie-Chabot There is a risk that Bank of Canada staff may inadvertently be biased when analyzing inflation: when inflation surprises on the downside, staff might emphasize negative idiosyncratic factors. When inflation surprises on the upside, staff might emphasize the positive idiosyncratic factors. Content Type(s): Staff research, Staff analytical notes JEL Code(s): E, E3, E31 Research Theme(s): Models and tools, Economic models, Monetary policy, Inflation dynamics and pressures
Disaggregating Household Sensitivity to Monetary Policy by Expenditure Category Staff analytical note 2018-32 Tony Chernis, Corinne Luu Because the Bank of Canada has started withdrawing monetary stimulus, monitoring the transmission of these changes to monetary policy will be important. Subcomponents of consumption and housing will likely respond differently to a monetary policy tightening, both in terms of the aggregate effect and timing. Content Type(s): Staff research, Staff analytical notes JEL Code(s): C, C3, C32, E, E2, E21, E22, E4, E43, E47, E5, E52 Research Theme(s): Financial system, Household and business credit, Monetary policy, Monetary policy framework and transmission, Real economy and forecasting
Monetary Policy Uncertainty: A Tale of Two Tails Staff working paper 2018-50 Tatjana Dahlhaus, Tatevik Sekhposyan We document a strong asymmetry in the evolution of federal funds rate expectations and map this observed asymmetry into measures of monetary policy uncertainty. We show that periods of monetary policy tightening and easing are distinctly related to downside (policy rate is higher than expected) and upside (policy rate is lower than expected) uncertainty. Content Type(s): Staff research, Staff working papers JEL Code(s): C, C1, C18, C3, C32, E, E0, E02, E4, E43, E5, E52 Research Theme(s): Models and tools, Econometric, statistical and computational methods, Monetary policy, Monetary policy framework and transmission, Monetary policy tools and implementation, Real economy and forecasting
Financial Development Beyond the Formal Financial Market Staff working paper 2018-49 Lin Shao This paper studies the effects of financial development, taking into account both formal and informal financing. Using cross-country firm-level data, we document that informal financing is utilized more by rich countries than poor countries. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E4, E44, O, O1, O17, O4, O47 Research Theme(s): Financial system, Financial institutions and intermediation, Household and business credit, Monetary policy, Real economy and forecasting
Price Selection Staff working paper 2018-44 Carlos Carvalho, Oleksiy Kryvtsov We propose a simple, model-free way to measure selection in price setting and its contribution to inflation dynamics. The proposed measure of price selection is based on the observed comovement between inflation and the average level from which adjusting prices depart. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E3, E31, E5, E51 Research Theme(s): Models and tools, Economic models, Monetary policy, Inflation dynamics and pressures, Monetary policy framework and transmission
Estimating the Impacts of Tariff Changes: Two Illustrative Scenarios Staff analytical note 2018-29 Karyne B. Charbonneau, Anthony Landry We build upon new developments in the international trade literature to construct a quantitative Ricardian framework similar to Caliendo and Parro (2015) to isolate and estimate the long-run economic impacts of tariff changes. Content Type(s): Staff research, Staff analytical notes JEL Code(s): F, F1, F11, F13, F14, F15, F5, F50, F6, F62, F68 Research Theme(s): Monetary policy, Real economy and forecasting, Structural challenges, International trade, finance and competitiveness
Weakness in Non-Commodity Exports: Demand versus Supply Factors Staff analytical note 2018-28 José Dorich, Vadym Lepetyuk, Jonathan Swarbrick We use the Terms-of-Trade Economic Model (ToTEM) to conduct demand- and supply-driven simulations, both of which deliver weakness in Canadian non-commodity exports relative to foreign activity in line with recent data. Content Type(s): Staff research, Staff analytical notes JEL Code(s): E, E5, E52, F, F1, F10, F14, F17 Research Theme(s): Models and tools, Economic models, Monetary policy, Real economy and forecasting, Structural challenges, International trade, finance and competitiveness
Characterizing Canada’s Export Sector by Industry: A Supply-Side Perspective Staff analytical note 2018-27 Taylor Webley This note examines supply-side trends in Canadian non-energy industries and their implications for export performance. Between 2002 and 2016, capital stocks and total labour input declined in many industries that export non-energy goods. These soft trends in the factors of production have likely contributed to the decline in non-energy exports in about half of the goods industries analyzed in this note. Content Type(s): Staff research, Staff analytical notes JEL Code(s): E, E2, E22, E23, E24, F, F1, F19 Research Theme(s): Monetary policy, Real economy and forecasting, Structural challenges, Digitalization and productivity, International trade, finance and competitiveness
Decomposing Canada’s Market Shares: An Update Staff analytical note 2018-26 Nicholas Labelle Building on the shift-share analysis of Barnett and Charbonneau (2015), this note decomposes Canada’s market shares in the United States, Europe and China for imports of non-energy goods into competitiveness, preference shifts and an interaction term. We find that, despite the depreciation of the dollar, Canada continued to lose market share over 2014–17 (around 0.4 percentage points lost per year on average over four years). Content Type(s): Staff research, Staff analytical notes JEL Code(s): F, F1, F10, F14, F4 Research Theme(s): Monetary policy, Real economy and forecasting, Structural challenges, International trade, finance and competitiveness