The Role of Long-Term Contracting in Business Lending Staff working paper 2024-2 Phoebe Tian This paper examines inefficiencies arising from a lack of long-term contracting in small business lending in China. Content Type(s): Staff research, Staff working papers JEL Code(s): D, D8, D83, D86, G, G2, G21, L, L1, L14, L2, L26 Research Theme(s): Financial system, Financial institutions and intermediation, Household and business credit, Models and tools, Economic models, Monetary policy, Monetary policy framework and transmission
Modelling Canadian mortgage debt and payments in a semi-structural model Staff analytical note 2024-1 Fares Bounajm, Austin McWhirter We show how Canadian mortgage debt dynamics can be modelled in a semi-structural macroeconomic model, such as the Bank of Canada’s LENS. The model we propose accounts for Canada’s unique mortgage debt structure. Content Type(s): Staff research, Staff analytical notes JEL Code(s): E, E2, E27, E4, E43, E47, G, G5, G51 Research Theme(s): Financial system, Household and business credit, Models and tools, Economic models, Monetary policy, Monetary policy framework and transmission
Predictive Density Combination Using a Tree-Based Synthesis Function Staff working paper 2023-61 Tony Chernis, Niko Hauzenberger, Florian Huber, Gary Koop, James Mitchell This paper studies non-parametric combinations of density forecasts. We introduce a regression tree-based approach that allows combination weights to vary on the features of the densities, time-trends or economic indicators. In two empirical applications, we show the benefits of this approach in terms of improved forecast accuracy and interpretability. Content Type(s): Staff research, Staff working papers JEL Code(s): C, C1, C11, C3, C32, C5, C53 Research Theme(s): Models and tools, Econometric, statistical and computational methods, Monetary policy, Real economy and forecasting
Perceived versus Calibrated Income Risks in Heterogeneous-Agent Consumption Models Staff working paper 2023-59 Tao Wang Perceived income risks reported in a survey of consumer expectations are more heterogeneous and, on average, lower than indirectly calibrated risks based on panel data. They prove to be one explanation for why a large fraction of households hold very little liquid savings and why accumulated wealth is widely unequal across households. Content Type(s): Staff research, Staff working papers JEL Code(s): D, D1, D14, E, E2, E21, E7, E71, G, G5, G51 Research Theme(s): Models and tools, Economic models, Monetary policy, Monetary policy framework and transmission, Real economy and forecasting
Understanding the Systemic Implications of Climate Transition Risk: Applying a Framework Using Canadian Financial System Data Staff discussion paper 2023-32 Gabriel Bruneau, Javier Ojea Ferreiro, Andrew Plummer, Marie-Christine Tremblay, Aidan Witts Our study aims to gain insight on financial stability and climate transition risk. We develop a methodological framework that captures the direct effects of a stressful climate transition shock as well as the indirect—or systemic—implications of these direct effects. We apply this framework using data from the Canadian financial system. Content Type(s): Staff research, Staff discussion papers JEL Code(s): C, C6, C63, G, G0, G01, G1, G10, G2, G20, Q, Q5, Q54 Research Theme(s): Financial system, Financial stability and systemic risk, Models and tools, Economic models, Structural challenges, Climate change
Finding the balance—measuring risks to inflation and to GDP growth Staff analytical note 2023-18 Bruno Feunou, James Kyeong Using our new quantitative tool, we show how the risks to the inflation and growth outlooks have evolved over the course of 2023. Content Type(s): Staff research, Staff analytical notes JEL Code(s): C, C3, C32, C5, C58, E, E4, E44, G, G1, G17 Research Theme(s): Models and tools, Economic models, Monetary policy, Inflation dynamics and pressures, Monetary policy framework and transmission, Real economy and forecasting
Making It Real: Bringing Research Models into Central Bank Projections Staff discussion paper 2023-29 Marc-André Gosselin, Sharon Kozicki Macroeconomic projections and risk analyses play an important role in guiding monetary policy decisions. Models are integral to this process. This paper discusses how the Bank of Canada brings research models and lessons learned from those models into the central bank projection environment. Content Type(s): Staff research, Staff discussion papers JEL Code(s): C, C3, C32, C5, C51, E, E3, E37, E4, E47, E5, E52 Research Theme(s): Models and tools, Economic models, Monetary policy, Monetary policy framework and transmission, Real economy and forecasting
Testing Collusion and Cooperation in Binary Choice Games Staff working paper 2023-58 Erhao Xie This paper studies the testable implication of players’ collusive or cooperative behaviour in a binary choice game with complete information. I illustrate the implementation of this test by revisiting the entry game between Walmart and Kmart. Content Type(s): Staff research, Staff working papers JEL Code(s): C, C5, C57, L, L1, L13 Research Theme(s): Financial markets and funds management, Market structure, Models and tools, Econometric, statistical and computational methods
International Portfolio Rebalancing and Fiscal Policy Spillovers Staff working paper 2023-56 Sami Alpanda, Uluc Aysun, Serdar Kabaca We evaluate, both empirically and theoretically, the spillover effects that debt-financed fiscal policy interventions of the United States have on other economies. We consider a two-country model with international portfolio rebalancing effects. We show that US fiscal expansions would increase global long-term rates and hinder economic activity in the rest of the world. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E3, E32, E6, E62, F, F4, F41, F44 Research Theme(s): Financial markets and funds management, International markets and currencies, Financial system, Financial stability and systemic risk, Models and tools, Economic models, Structural challenges, International trade, finance and competitiveness
Machine learning for economics research: when, what and how Staff analytical note 2023-16 Ajit Desai This article reviews selected papers that use machine learning for economics research and policy analysis. Our review highlights when machine learning is used in economics, the commonly preferred models and how those models are used. Content Type(s): Staff research, Staff analytical notes JEL Code(s): A, A1, A10, B, B2, B23, C, C4, C45, C5, C55 Research Theme(s): Models and tools, Econometric, statistical and computational methods, Structural challenges, Digitalization and productivity