Core inflation over the COVID-19 pandemic Staff Analytical Note 2022-17 Mikael Khan, Elyse Sullivan We assess the usefulness of various measures of core inflation over the COVID-19 pandemic. We find that Cpi-trim and CPI-median provided the best signal of underlying inflation. The favourable performance of these measures stems from their lack of reliance on historical experience, an especially valuable feature in unprecedented times. Content Type(s): Staff research, Staff analytical notes Topic(s): Econometric and statistical methods, Inflation and prices, Monetary policy JEL Code(s): C, C1, C18, E, E3, E31
Private Digital Cryptoassets as Investment? Bitcoin Ownership and Use in Canada, 2016-2021 Staff Working Paper 2022-44 Daniela Balutel, Walter Engert, Christopher Henry, Kim Huynh, Marcel Voia We report on the dynamics of Bitcoin awareness and ownership from 2016 to 2021, using the Bank of Canada's Bitcoin Omnibus Surveys (BTCOS). Our analysis also helps understand Bitcoin owners who adopted during the COVID-19 and how they differ from long-term owners. Content Type(s): Staff research, Staff working papers Topic(s): Bank notes, Digital currencies and fintech, Econometric and statistical methods JEL Code(s): C, C1, C12, E, E4, O, O5, O51
October 12, 2022 Five things we learned about Canadian Bitcoin owners in 2021 Daniela Balutel, Walter Engert, Christopher Henry, Kim Huynh, Marcel Voia We present key findings from the 2021 Bitcoin Omnibus Survey on Canadians’ awareness and ownership of Bitcoin. Most Canadians have heard of Bitcoin, which remains primarily used as an investment. Ownership jumped in 2021, reflecting increased savings during the pandemic and greater availability of user-friendly platforms to buy Bitcoin. Content Type(s): Publications, Financial System Hub articles JEL Code(s): C, C1, C12, E, E4, O, O5, O51
Examining recent revisions to CPI-common Staff Analytical Note 2022-15 Elyse Sullivan Unusually large revisions to CPI-common in recent months stem from increased common movements across consumer price index components amid broad inflationary pressures. With recent revisions, CPI-common is more closely aligned with the Bank of Canada’s other two preferred measures of core inflation. However, caution is necessary when interpreting real-time estimates of CPI-common in the current environment. Content Type(s): Staff research, Staff analytical notes Topic(s): Econometric and statistical methods, Inflation and prices JEL Code(s): C, C1, C13, C18, E, E3, E31
Forecasting Banks’ Corporate Loan Losses Under Stress: A New Corporate Default Model Technical Report No. 122 Gabriel Bruneau, Thibaut Duprey, Ruben Hipp We present a new corporate default model, one of the building blocks of the Bank of Canada’s bank stress-testing infrastructure. The model is used to forecast corporate loan losses of the Canadian banking sector under stress. Content Type(s): Staff research, Technical reports Topic(s): Economic models, Financial institutions, Financial stability, Financial system regulation and policies JEL Code(s): C, C2, C22, C5, C52, C53, G, G1, G17, G2, G21, G28
Behavioral Learning Equilibria in New Keynesian Models Staff Working Paper 2022-42 Cars Hommes, Kostas Mavromatis, Tolga Özden, Mei Zhu We introduce behavioral learning equilibria (BLE) into DSGE models with boundedly rational agents using simple but optimal first order autoregressive forecasting rules. The Smets-Wouters DSGE model with BLE is estimated and fits well with inflation survey expectations. As a policy application, we show that learning requires a lower degree of interest rate smoothing. Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Economic models, Inflation and prices, Monetary policy JEL Code(s): C, C1, C11, D, D8, D83, D84, E, E3, E6, E62
Calculating Effective Degrees of Freedom for Forecast Combinations and Ensemble Models Staff Discussion Paper 2022-19 James Younker This paper derives a calculation for the effective degrees of freedom of a forecast combination under a set of general conditions for linear models. Computing effective degrees of freedom shows that the complexity cost of a forecast combination is driven by the parameters in the weighting scheme and the weighted average of parameters in the auxiliary models. Content Type(s): Staff research, Staff discussion papers Topic(s): Econometric and statistical methods JEL Code(s): C, C0, C01, C02, C1, C13, C5, C50, C51, C52, C53
Sectoral Uncertainty Staff Working Paper 2022-38 Efrem Castelnuovo, Kerem Tuzcuoglu, Luis Uzeda We propose a new empirical framework that jointly decomposes the conditional variance of economic time series into a common and a sector-specific uncertainty component. We apply our framework to a disaggregated industrial production series for the US economy. We identify unexpected changes in durable goods uncertainty as drivers of downturns, while unexpected hikes in non-durable goods uncertainty are expansionary. Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Econometric and statistical methods, Monetary policy and uncertainty JEL Code(s): C, C5, C51, C55, E, E3, E32, E4, E44
Cash, COVID-19 and the Prospects for a Canadian Digital Dollar Staff Discussion Paper 2022-17 Walter Engert, Kim Huynh We provide an analysis of cash trends in Canada before and during the COVID-19 pandemic. We also consider the potential two scenarios for issuance of a central bank digital currency in Canada: the emergence of a cashless society or the widespread use of an alternative digital currency in Canada. Finally, we discuss the Canadian experience in maintaining cash as an efficient and accessible method of payment and store of value. Content Type(s): Staff research, Staff discussion papers Topic(s): Bank notes, Central bank research, Coronavirus disease (COVID-19), Digital currencies and fintech, Econometric and statistical methods JEL Code(s): C, C1, C12, C9, E, E4, O, O5, O54
Weather the Storms? Hurricanes, Technology and Oil Production Staff Working Paper 2022-36 Johan Brannlund, Geoffrey R. Dunbar, Reinhard Ellwanger, Matthew Krutkiewicz Do technological improvements mitigate the potential damages from extreme weather events? We show that hurricanes lower offshore oil production in the Gulf of Mexico and that stronger storms have larger impacts. Regulations enacted in 1980 that required improved offshore construction standards only modestly mitigated the production losses. Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Climate change, Potential output JEL Code(s): C, C2, C22, C23, Q, Q4, Q40, Q48, Q5, Q54