Household indebtedness risks in the wake of COVID‑19 Staff Analytical Note 2020-8 Olga Bilyk, Anson T. Y. Ho, Mikael Khan, Geneviève Vallée COVID-19 presents challenges for indebted households. We assess these by drawing parallels between pandemics and natural disasters. Taking into account the financial health of the household sector when the pandemic began, we run model simulations to illustrate how payment deferrals and the labour market recovery will affect mortgage defaults. Content Type(s): Staff research, Staff analytical notes Topic(s): Climate change, Coronavirus disease (COVID-19), Credit and credit aggregates, Econometric and statistical methods, Financial stability, Fiscal policy, Housing, Recent economic and financial developments, Sectoral balance sheet JEL Code(s): C, C2, C21, D, D1, D12, D14, E, E2, E24, E27, E6, E62, G, G2, G21, G28, R, R2
IMPACT: The Bank of Canada’s International Model for Projecting Activity Technical Report No. 116 Patrick Blagrave, Claudia Godbout, Justin-Damien Guénette, René Lalonde, Nikita Perevalov We present the structure and features of the International Model for Projecting Activity (IMPACT), a global semi-structural model used to conduct projections and policy analysis at the Bank of Canada. Major blocks of the model are developed based on the rational error correction framework of Kozicki and Tinsley (1999), which allows the model to strike a balance between theoretical structure and empirical performance. Content Type(s): Staff research, Technical reports Topic(s): Business fluctuations and cycles, Econometric and statistical methods, Economic models, International topics JEL Code(s): C, C6, C68, E, E2, E27, E3, E37, F, F0, F01, F3, F32, F4, F47
Assessing the Resilience of the Canadian Banking System Staff Analytical Note 2019-16 Charles Gaa, Xuezhi Liu, Cameron MacDonald, Xiangjin Shen The stability of the Canadian financial system, as well as its ability to support the Canadian economy, depends on the ability of financial institutions to absorb and manage major shocks. This is especially true for large banks, which perform services essential to the Canadian economy. Content Type(s): Staff research, Staff analytical notes Topic(s): Financial institutions, Financial stability JEL Code(s): C, C6, C63, E, E2, E27, E3, E37, E4, E44, G, G0, G01, G2, G21
The Trend Unemployment Rate in Canada: Searching for the Unobservable Staff Working Paper 2019-13 Dany Brouillette, Marie-Noëlle Robitaille, Laurence Savoie-Chabot, Pierre St-Amant, Bassirou Gueye, Elise Nelson In this paper, we assess several methods that have been used to measure the Canadian trend unemployment rate (TUR). We also consider improvements and extensions to some existing methods. Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Economic models, Inflation and prices, Labour markets JEL Code(s): C, C5, C52, C53, E, E2, E24, E27
Fundamental Drivers of Existing Home Sales in Canada Staff Discussion Paper 2018-16 Taylor Webley Existing home sales’ share of Canada’s economic pie has been rising in recent years, and variation around this trend has resulted in outsized contributions to changes in real gross domestic product (GDP). In this context, we use a cointegration framework to estimate the level of resale activity across the Canadian provinces that is supported by fundamentals—namely, full-time employment, housing affordability and migration flows—to help look through the volatility. Content Type(s): Staff research, Staff discussion papers Topic(s): Econometric and statistical methods, Economic models, Housing JEL Code(s): C, C2, C22, C23, E, E2, E27, R, R2, R21
Modelling the Macrofinancial Effects of a House Price Correction in Canada Staff Analytical Note 2018-36 Thibaut Duprey, Xuezhi Liu, Cameron MacDonald, Maarten van Oordt, Sofia Priazhkina, Xiangjin Shen, Joshua Slive We use a suite of risk-assessment models to examine the possible impact of a hypothetical house price correction, centred in the Toronto and Vancouver areas. We also assume financial stress significantly amplifies the macroeconomic impact of the house price decline. Content Type(s): Staff research, Staff analytical notes Topic(s): Financial institutions, Financial stability, Housing JEL Code(s): E, E2, E27, E3, E37, E4, E44, G, G2, G21
The Framework for Risk Identification and Assessment Technical Report No. 113 Cameron MacDonald, Virginie Traclet Risk assessment models are an important component of the Bank’s analytical tool kit for assessing the resilience of the financial system. We describe the Framework for Risk Identification and Assessment (FRIDA), a suite of models developed at the Bank of Canada to quantify the impact of financial stability risks to the broader economy and a range of financial system participants (households, businesses and banks). Content Type(s): Staff research, Technical reports Topic(s): Economic models, Financial institutions, Financial stability, Housing JEL Code(s): C, C3, C5, C6, C7, D, D1, E, E0, E00, E2, E27, E3, E37, E4, E47, G, G0, G2, G21
Can Media and Text Analytics Provide Insights into Labour Market Conditions in China? Staff Working Paper 2018-12 Jeannine Bailliu, Xinfen Han, Mark Kruger, Yu-Hsien Liu, Sri Thanabalasingam The official Chinese labour market indicators have been seen as problematic, given their small cyclical movement and their only-partial capture of the labour force. In our paper, we build a monthly Chinese labour market conditions index (LMCI) using text analytics applied to mainland Chinese-language newspapers over the period from 2003 to 2017. Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods, International topics, Labour markets JEL Code(s): C, C3, C38, C5, C55, E, E2, E24, E27
Alternative Scenario to the October 2017 MPR Base-Case Projection: Higher Potential Growth Staff Analytical Note 2017-18 Jing Yang, Ben Tomlin, Olivier Gervais We construct an alternative scenario in which trend labour input and business investment are stronger than that expected in the Bank of Canada’s base-case projection in the October 2017 Monetary Policy Report. Content Type(s): Staff research, Staff analytical notes Topic(s): Inflation and prices, Monetary policy, Potential output JEL Code(s): E, E2, E22, E24, E27, E5
Implementing Cross-Border Interbank Lending in BoC-GEM-FIN Staff Discussion Paper 2016-19 Malik Shukayev, Argyn Toktamyssov BIS interbank lending data show that the Great Recession generated large and persistent changes in the international interbank lending positions of various countries. The main objective of this study is to understand the role of changes in international interbank credit flows in transmitting shocks across borders. Content Type(s): Staff research, Staff discussion papers Topic(s): Business fluctuations and cycles, Economic models, International topics JEL Code(s): E, E2, E27, E3, E37, F, F4, F47