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293 Results

Intermediary Market Power and Capital Constraints

Staff Working Paper 2023-51 Jason Allen, Milena Wittwer
We examine how intermediary capitalization affects asset prices in a framework that allows for intermediary market power. We introduce a model in which capital-constrained intermediaries buy or trade an asset in an imperfectly competitive market, and we show that weaker capital constraints lead to both higher prices and intermediary markups.

Predicting Changes in Canadian Housing Markets with Machine Learning

Staff Discussion Paper 2023-21 Johan Brannlund, Helen Lao, Maureen MacIsaac, Jing Yang
We apply two machine learning algorithms to forecast monthly growth of house prices and existing homes sales in Canada. Although the algorithms can sometimes outperform a linear model, the improvement in forecast accuracy is not always statistically significant.

Flagship Entry in Online Marketplaces

Staff Working Paper 2023-41 Ginger Zhe Jin, Zhentong Lu, Xiaolu Zhou, Lu Fang
In this paper, we empirically study how flagship entry in an online marketplace affects consumers, the platform, and various sellers on the platform. We find flagship entry may benefit consumers by expanding the choice set, by intensifying price competition within the entry brand, and by improving consumer perception for parts of the platform.

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.

Do hedge funds support liquidity in the Government of Canada bond market?

Staff Analytical Note 2023-11 Jabir Sandhu, Rishi Vala
While Government of Canada bond transactions of hedge funds are typically in the opposite direction to those of other market participants, during the peak period of market turmoil in March 2020, hedge funds sold these bonds, just as other market participants did. This shows that hedge funds can at times contribute to one-sided markets and amplify declines in market liquidity.

Estimating the Slope of the Demand Function at Auctions for Government of Canada Bonds

Staff Discussion Paper 2023-12 Bo Young Chang
We use bid data from Government of Canada bond auctions between 1999 and 2021 to gauge the yield sensitivity of these bonds to the issuance amount. Our new metric estimates the demand function of the bidders at each auction and offers insights into the relationship between supply and yield of government bonds.
Content Type(s): Staff research, Staff discussion papers Topic(s): Debt management, Interest rates JEL Code(s): D, D4, D44, G, G1, G12

Why Consumers Disagree About Future Inflation

Staff Discussion Paper 2023-11 Naveen Rai, Patrick Sabourin
Since 2022, consumer inflation expectations have shifted, with a significant increase in those expecting high inflation in the coming year and a surge in those expecting deflation further in the future. Using data from the Canadian Survey of Consumer Expectations, this paper seeks to assess the factors that influence people to expect high inflation, moderate inflation or deflation.
Content Type(s): Staff research, Staff discussion papers Topic(s): Inflation and prices JEL Code(s): C, C8, C83, D, D8, D84, E, E3, E31

Markups and inflation during the COVID-19 pandemic

Staff Analytical Note 2023-8 Olga Bilyk, Timothy Grieder, Mikael Khan
We find that prices and costs for consumer-oriented firms moved roughly one-for-one during the COVID-19 pandemic. This means firms fully passed rising costs through to the prices they charged. However, our results are suggestive, given data limitations and the uncertainty associated with estimating markups.
Content Type(s): Staff research, Staff analytical notes Topic(s): Firm dynamics, Inflation and prices JEL Code(s): D, D2, D4, E, E2, E3, L, L1

SME Failures Under Large Liquidity Shocks: An Application to the COVID-19 Crisis

We study the effects of financial frictions on firm exit when firms face large liquidity shocks. We develop a simple model of firm cost-minimization that introduces a financial friction that limits firms’ borrowing capacity to smooth temporary shocks to liquidity.
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