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Cash and COVID-19: The impact of the second wave in Canada

The COVID-19 pandemic significantly increased the demand for cash. Cash in circulation increased sharply from March through December 2020, particularly in the early months of this period. Although use of electronic methods of payment also increased significantly, cash use for payments remains high for low-value transactions and among certain demographic groups.

Stressed but not Helpless: Strategic Behaviour of Banks Under Adverse Market Conditions

Staff Working Paper 2021-35 Grzegorz Halaj, Sofia Priazhkina
Our stress-testing tool considers banks under stress that can strategically manage their balance sheets. Using confidential Canadian supervisory data, we assess whether bank behaviour to maximize shareholder value can amplify a hypothetical stress scenario.

Small and smaller: How the economic outlook of small firms relates to size

Staff Analytical Note 2021-14 Chris D'Souza, James Fudurich, Farrukh Suvankulov
Firms with fewer than 100 workers employ about 65 percent of the total labour force in Canada. An online survey experiment was conducted with firms of this size in Canada in 2018–19. We compare the responses of small and micro firms to explore how their characteristics and economic outlooks relate to their size.

Shaping the future: Policy shocks and the GDP growth distribution

Can central bank and government policies impact the risks around the outlook for GDP growth? We find that fiscal stimulus makes strong GDP growth more likely—even more so when monetary policy is constrained—rather than weak GDP growth less likely. Thus, fiscal stimulus should accelerate the recovery phase of the COVID-19 pandemic.

Detecting exuberance in house prices across Canadian cities

Staff Analytical Note 2021-9 Ugochi Emenogu, Cars Hommes, Mikael Khan
We introduce a model to detect periods of extrapolative house price expectations across Canadian cities. The House Price Exuberance Indicator can be updated on a quarterly basis to support the Bank of Canada’s broader assessment of housing market imbalances.

Evolving Temperature Dynamics in Canada: Preliminary Evidence Based on 60 Years of Data

Are summers getting hotter? Do daily temperatures change more than they used to? Using daily Canadian temperature data from 1960 to 2020 and modern econometric methods, we provide economists and policy-makers evidence on the important climate change issue of evolving temperatures.

How Long is Forever in the Laboratory? Three Implementations of an Infinite-Horizon Monetary Economy

Staff Working Paper 2021-16 Janet Hua Jiang, Daniela Puzzello, Cathy Zhang
Standard monetary models adopt an infinite horizon with discounting. Testing these models in the lab requires implementing this horizon within a limited time frame. We compare three approaches to such an implementation and discuss their relative advantages.

Cash and COVID-19: The Effects of Lifting Containment Measures on Cash Demand and Use

Staff Discussion Paper 2021-3 Heng Chen, Walter Engert, Kim Huynh, Gradon Nicholls, Julia Zhu
Using Bank Note Distribution System data on the demand for cash up to September 2020, we find that demand was strong. This is true even though cash use for payments declined early in the pandemic. When mobility restrictions and lockdown measures were eased, cash use for payments increased sharply but remained less popular than electronic methods of payment.