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48 Results

Markups and Inflation in Oligopolistic Markets: Evidence from Wholesale Price Data

Staff Working Paper 2024-20 Patrick Alexander, Lu Han, Oleksiy Kryvtsov, Ben Tomlin
We study how the interaction of market power and nominal price rigidity influences inflation dynamics. We find that pass-through declines with price stickiness when markets are concentrated, which implies a lower slope of the New Keynesian Phillips curve.

Digital Payments in Firm Networks: Theory of Adoption and Quantum Algorithm

We build a network formation game of firms with trade flows to study the adoption and usage of a new digital currency as an alternative to correspondent banking.

Liquidity risks at Canadian life insurance companies

Staff Analytical Note 2024-7 Patrick Aldridge, Stephane Gignac, Rishi Vala, Adrian Walton
We examine how life insurers manage liquidity risks created by their business model. We find that Canadian life insurers did not face significant liquidity draws and continued their usual investment behaviour during the COVID-19 crisis and as interest rates increased in 2022.

What has been putting upward pressure on CORRA?

Staff Analytical Note 2024-4 Boran Plong, Neil Maru
From the autumn of 2023 into early 2024, the Canadian Overnight Repo Rate Average (CORRA), a measure of the cost of overnight general collateral Canadian dollar repos, was consistently well above the Bank’s target for the overnight rate. We find that, among several factors, long bond positions that require repo financing are the main driver of the recent upward pressure on CORRA.

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.

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

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
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