A Behavioral New Keynesian Model of a Small Open Economy Under Limited Foresight Staff Working Paper 2023-44 Seunghoon Na, Yinxi Xie This paper studies exchange rate dynamics by incorporating bounded rationality, that is, limited foresight, in a small open-economy model. This behavior of limited foresight helps explain several observations and puzzles in the data of exchange rate movements. Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Exchange rates, International topics, Monetary policy transmission JEL Code(s): E, E4, E43, E7, E70, F, F3, F31, F4, F41
Digitalization: Implications for Monetary Policy Staff Discussion Paper 2023-18 Vivian Chu, Tatjana Dahlhaus, Christopher Hajzler, Pierre-Yves Yanni We explore the implications of digitalization for monetary policy, both in terms of how monetary policy affects the economy and in terms of data analysis and communication with the public. Content Type(s): Staff research, Staff discussion papers Topic(s): Digitalization, Inflation and prices, Market structure and pricing, Monetary policy, Monetary policy communications, Monetary policy transmission JEL Code(s): C, C4, C8, E, E3, E31, E32, E5, E52
Digitalization: Productivity Staff Discussion Paper 2023-17 Jeffrey Mollins, Temel Taskin We examine the relationship between digitalization and productivity, the factors that influence this relationship, and how digitalization’s effect on productivity could change firm behaviour. Content Type(s): Staff research, Staff discussion papers Topic(s): Digitalization, Productivity JEL Code(s): E, E2, L, L1, L11, O, O4, O47, O5, O51
Unmet Payment Needs and a Central Bank Digital Currency Staff Discussion Paper 2023-15 Christopher Henry, Walter Engert, Alexandra Sutton-Lalani, Sebastian Hernandez, Darcey McVanel, Kim Huynh We discuss the payment habits of Canadians both in the current payment environment and in a hypothetical cashless environment. Content Type(s): Staff research, Staff discussion papers Topic(s): Bank notes, Central bank research, Digital currencies and fintech, Financial services JEL Code(s): C, C1, C12, C9, E, E4, O, O5, O54
The contribution of firm profits to the recent rise in inflation Staff Analytical Note 2023-12 Panagiotis Bouras, Christian Bustamante, Xing Guo, Jacob Short We measure the contribution to inflation from the growth in markups of Canadian firms. The dynamics of inflation and markups suggest that changes in markups could account for less than one-tenth of inflation in 2021. Further, they suggest that peak inflation was driven primarily by changes in the costs of firms. Content Type(s): Staff research, Staff analytical notes Topic(s): Firm dynamics, Inflation and prices, Market structure and pricing JEL Code(s): D, D2, D22, D4, E, E3, E31, L, L1, L11
Is Money Essential? An Experimental Approach Staff Working Paper 2023-39 Janet Hua Jiang, Peter Norman, Daniela Puzzello, Bruno Sultanum, Randall Wright Monetary theory says that money is essential if it helps to achieve better incentive-feasible outcomes. We test this in the laboratory. Content Type(s): Staff research, Staff working papers Topic(s): Central bank research, Economic models JEL Code(s): C, C9, C92, E, E4, E5
It takes a panel to predict the future: What the stock market says about future economic growth in Canada Staff Analytical Note 2023-9 Greg Adams, Jean-Sébastien Fontaine Valuation ratios in the Canadian stock market can help reveal investors’ expectations about future economic growth because the impact of economic growth on valuation ratios can vary across industries. We find that this variation helps produce accurate forecasts of future growth of real gross domestic product in Canada. The forecasts from our model declined by just over 3 percentage points between January 2022 and February 2023—a period when the Bank of Canada rapidly increased the overnight rate. As well, we find that interest-rate-sensitive industries had an outsized contribution to this expected slowdown in growth. Content Type(s): Staff research, Staff analytical notes Topic(s): Asset pricing, Financial markets, Monetary policy transmission JEL Code(s): E, E4, E44, E47, E5, E52
Cryptoasset Ownership and Use in Canada: An Update for 2022 Staff Discussion Paper 2023-14 Daniela Balutel, Christopher Henry, Doina Rusu We find that Bitcoin ownership declined from 13% in 2021 to 10% in 2022. This drop occurred against a background of steep price declines and an increasingly tight regulatory atmosphere. Content Type(s): Staff research, Staff discussion papers Topic(s): Bank notes, Digital currencies and fintech, Econometric and statistical methods JEL Code(s): C, C8, C81, E, E4, O, O5, O51
Global Demand and Supply Sentiment: Evidence from Earnings Calls Staff Working Paper 2023-37 Temel Taskin, Franz Ulrich Ruch This paper quantifies global demand, supply and uncertainty shocks and compares two major global recessions: the 2008–09 Great Recession and the COVID-19 pandemic. We use two alternate approaches to decompose economic shocks: text mining techniques on earnings calls transcripts and a structural Bayesian vector autoregression model. Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Coronavirus disease (COVID-19), Econometric and statistical methods, Inflation and prices, International topics JEL Code(s): C, C1, C11, C3, C32, E, E3, E32, G, G1, G10
What Can Earnings Calls Tell Us About the Output Gap and Inflation in Canada? Staff Discussion Paper 2023-13 Marc-André Gosselin, Temel Taskin We construct new indicators of demand and supply for the Canadian economy by using natural language processing techniques to analyze earnings calls of publicly listed firms. Our results indicate that the new indicators could help central banks identify inflationary pressures in real time. Content Type(s): Staff research, Staff discussion papers Topic(s): Central bank research, Domestic demand and components, Econometric and statistical methods, Inflation and prices, Potential output JEL Code(s): C, C1, C3, E, E3, E5