Prima: The Bank of Canada’s New Projection and Policy-Analysis Model—An Overview Staff analytical paper 2026-47 Donald Coletti, Martin Kuncl, Martin Harding, Dmitry Matveev, Tolga Özden, Yang Zhang Prima is the Bank of Canada’s new model for projection and policy analysis. It builds on the economic foundations of earlier Bank models, adding detail on how sectoral pressures affect production costs and their pass-through to consumer prices. Content Type(s): Staff research, Staff analytical paper JEL Code(s): C, C4, C43, C8, C82, E, E3, E30, E31, E37 Research Theme(s): Models and tools, Econometric, statistical and computational methods, Monetary policy, Inflation dynamics and pressures, Real economy and forecasting
Sector-based producer price indexes: New measures of producer price pressures in Canada Staff analytical paper 2026-46 Yena Joo, Ali Rouhghalandari, Vivian Chu, Xin Ha Producer price indexes measure changes in the prices that producers receive for their outputs or that they pay for their inputs. Statistics Canada publishes a range of producer price indexes for specific products and industries. For the first time, these series have been combined into a small set of broad sectoral measures. Content Type(s): Staff research, Staff analytical paper JEL Code(s): C, C4, C43, C8, C82, E, E3, E30, E31, E37 Research Theme(s): Models and tools, Econometric, statistical and computational methods, Economic models, Monetary policy, Inflation dynamics and pressures, Real economy and forecasting
A New Approach to Estimating Portfolio-Balance Models of the Yield Curve Staff working paper 2026-33 Antonio Diez de los Rios Portfolio-balance models of the yield curve are notoriously hard to estimate. This paper offers a simple, two-step estimation approach that can be implemented with standard term structure estimation methods. In our application to U.S. Treasury data, our method recovers economically interpretable drivers of the yield curve. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E4, E43, E44, G, G1, G12, H, H6, H63 Research Theme(s): Financial markets and funds management, Funds management, Models and tools, Econometric, statistical and computational methods
Liquidity Optimization in Gross Settlement Systems with Quantum Reordering: Application to TARGET2∗ Staff working paper 2026-32 Valerio Astuti, Adriano Baldeschi, Luca Bastianelli, Giuseppe Bruno, Riccardo Russo, Ajit Desai, Danica Marsden Building on our earlier quantum algorithm, this paper shows that reordering queued payments can significantly reduce liquidity needs. The algorithm performs well on smaller payment batches, while traditional algorithms can process larger batches and deliver greater savings. Machine learning also helps identify which payment patterns offer the greatest potential for improvement. Content Type(s): Staff research, Staff working papers JEL Code(s): C, C6, C61, C63, C8, C83, E, E4, E42, E5, E58 Research Theme(s): Models and tools, Econometric, statistical and computational methods, Money and payments, Payment and financial market infrastructures
Segmented Inflation Dynamics (SID): Identifying Trend Inflation from the Price Index Staff analytical paper 2026-43 André Binette, Colleen Smith This note presents Segmented Inflation Dynamics (SID), a data-driven tool for assessing trend inflation. SID uses time-series segmentation to divide the price index into contiguous segments with stable inflation rates. Based on data through December 2025, SID indicates that Canada’s trend inflation has been near 2 percent since early 2024. Content Type(s): Staff research, Staff analytical paper JEL Code(s): C, C2, C22, E, E3, E31, E5, E52 Research Theme(s): Models and tools, Econometric, statistical and computational methods, Monetary policy, Inflation dynamics and pressures
Climate stress test of the global supply chain network: the case of river floods Staff working paper 2026-30 Georgios Papadopoulos, Javier Ojea Ferreiro, Roberto Panzica This study investigates how extreme flood events can indirectly impact the global supply chain through production disruptions. The findings emphasize that the size of inventories is crucial; a lean-inventory system leads to faster shock propagation, higher losses, and fewer recoveries compared to an abundant-inventory system. Content Type(s): Staff research, Staff working papers JEL Code(s): C, C6, C60, C63, D, D8, D85, Q, Q5, Q54 Research Theme(s): Models and tools, Econometric, statistical and computational methods, Structural challenges, Climate change, International trade, finance and competitiveness
Time Use and Consumption Expenditures Staff working paper 2026-29 Daniela Hauser, Stefano Gnocchi, Laure Simon This paper shows that consumption activities toward which households reallocate more time in recessions see larger expenditure declines, revealing a systematic link between time-use and expenditure cyclicality. A two-sector New Keynesian model shows this time-expenditure substitution explains roughly forty percent of consumption's response to monetary policy shocks. Content Type(s): Staff research, Staff working papers JEL Code(s): D, D1, D12, E, E2, E21, E3, E32, E5, E52, J, J2, J22 Research Theme(s): Models and tools, Economic models, Monetary policy, Inflation dynamics and pressures, Monetary policy framework and transmission
Balancing Act: Monetary Policy Responses to Natural Disasters Staff working paper 2026-28 Tatjana Dahlhaus, Alexander Ueberfeldt, Malik Shukayev Natural disasters can create important challenges for monetary policy in resource-rich small open economies. Using a DSGE model calibrated to Canada, we show that most disasters operate as adverse supply shocks, lowering output and raising inflation, thereby creating a trade-off for monetary policy. Content Type(s): Staff research, Staff working papers JEL Code(s): C, C1, C11, C3, C32, D, D6, D63, E, E5, E52, Q, Q5, Q54 Research Theme(s): Models and tools, Economic models, Monetary policy, Monetary policy framework and transmission, Structural challenges, Climate change
From Stress to Strategy: How Banks Balance the Scales Staff working paper 2026-26 Ruben Hipp, Javier Ojea Ferreiro This paper develops a stress-testing framework in which banks strategically adjust their balance sheets in response to regulatory constraints and market conditions. Applied to Canada’s largest banks, it quantifies the effects of macroprudential policies on lending and identifies systemic vulnerabilities through reverse stress testing. Content Type(s): Staff research, Staff working papers JEL Code(s): C, C6, C63, C7, C73, G, G2, G21, G3, G32, H, H1, H12 Research Theme(s): Financial system, Financial institutions and intermediation, Financial stability and systemic risk, Models and tools, Economic models
Time-Inconsistent Manager Incentives and Capital Formation Staff working paper 2026-25 José-Víctor Ríos-Rull, Josef Schroth, Tamon Takamura, Yaz Terajima In a dynamic model with limited commitment, aggregate payout-based compensation induces managers to raise outside equity yet invest too little today. Per-share compensation eliminates the dilution motive and restores efficient investment, but it does so through slower capital accumulation that better protects incumbent shareholder value. Content Type(s): Staff research, Staff working papers JEL Code(s): G, G3, G32, G34, J, J3, J33 Research Theme(s): Financial markets and funds management, Market functioning, Models and tools, Economic models