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41 Results

Corporate investment and monetary policy transmission in Canada

Staff Analytical Note 2020-26 Min Jae Kim, Jonathan Witmer
Unexpected changes in interest rates lead small firms to materially change their investment rate. Large firms, in contrast, show a smaller response. This suggests both that financial conditions are an important channel for transmitting monetary policy and that firm characteristics can help us better understand fluctuations in business investment.

Outside Investor Access to Top Management: Market Monitoring versus Stock Price Manipulation

Staff Working Paper 2020-43 Josef Schroth
Should managers be paid in stock options if they provide stock-market participants with information about the firm? This paper studies how firm owners trade off the benefit of stock-price incentives and better-informed market participants against the cost of potential stock-price manipulation.

The Canadian corporate investment gap

Staff Analytical Note 2020-19 Chris D'Souza, Timothy Grieder, Daniel Hyun, Jonathan Witmer
Business investment has been lower than expected in Canada and abroad since the financial crisis of 2007–09. This corporate investment gap is mirrored in firms’ other financing decisions, as they have increased cash holdings and dividend payments and decreased issuance of debt and equity.

The potential effect of a central bank digital currency on deposit funding in Canada

Staff Analytical Note 2020-15 Alejandro García, Bena Lands, Xuezhi Liu, Joshua Slive
A retail central bank digital currency denominated in Canadian dollars could, in theory, create competition for bank deposit funding.

Identifying Aggregate Shocks with Micro-level Heterogeneity: Financial Shocks and Investment Fluctuation

Staff Working Paper 2020-17 Xing Guo
This paper identifies aggregate financial shocks and quantifies their effects on business investment based on an estimated DSGE model with firm-level heterogeneity. On average, financial shocks contribute only 3% of the variation in U.S. public firms’ aggregate investment.

Assessment of Liquidity Creation in the Canadian Banking System

Staff Analytical Note 2019-30 Annika Gnann, Sahika Kaya
Liquidity creation is a fundamental function of banks. It provides the public with easy access to funds. These funds are important because they allow households and businesses to consume and invest. In this note, we measure liquidity creation by Canadian financial institutions from the first quarter of 2012 to the second quarter of 2019, using a methodology suggested by Berger and Bouwman (2009) and known as the BB measure.

Borrowing Costs for Government of Canada Treasury Bills

Staff Analytical Note 2019-28 Jabir Sandhu, Adrian Walton, Jessica Lee
The cost of borrowing Government of Canada treasury bills (t-bills) in the repurchase (repo) market is mainly explained by the relationship between the parties involved. Some pairs of parties conduct most of their repos for t-bills rather than bonds, and at relatively high borrowing costs. We speculate that these pairs have formed a mutually beneficial service relationship in which one party consistently receives t-bills, while the other receives cash at a relatively cheap rate.
Content Type(s): Staff research, Staff analytical notes Topic(s): Financial markets JEL Code(s): G, G1, G10, G11, G12, G2, G20, G21, G23, G3, G32

Relative Value of Government of Canada Bonds

Staff Analytical Note 2019-23 Jean-Sébastien Fontaine, Jabir Sandhu, Adrian Walton
Government of Canada bonds in circulation that promise very similar payoffs can have different prices. We study the reason for these differences. Bonds that trade more often and earn high rental income in the repurchase agreement (repo) market tend to have higher prices. Bonds with longer tenors and times to maturity tend to have lower prices. This contrast between cheap and expensive bonds is important because trading volume and rental income can change rapidly, unlike tenor and time to maturity, which are stable.
Content Type(s): Staff research, Staff analytical notes Topic(s): Financial markets JEL Code(s): G, G1, G10, G11, G12, G2, G23, G3, G32

Measuring Non-Financial Corporate Sector Vulnerabilities in Canada

Staff Analytical Note 2019-15 Timothy Grieder, Claire Schaffter
The ratio of non-financial corporate debt to gross domestic product in Canada has increased noticeably in recent years and is currently at an all-time high. In light of this development, we use a unique firm-level dataset to construct vulnerability indicators for the non-financial corporate sector in Canada.