Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/241217 
Year of Publication: 
2020
Series/Report no.: 
Bank of Canada Staff Working Paper No. 2020-51
Publisher: 
Bank of Canada, Ottawa
Abstract: 
This paper develops an agent-based modelling approach to quantify the impact of COVID-19-induced economic disruptions on household debt and unplanned savings over 2020. We merge data from the Survey of Financial Security and the Survey of Household Spending to construct a representative cross-section of households who vary in their income, debt portfolios and mix of consumption expenditures. We simulate a series of individual and aggregate shocks to household income and consumption expenditures that incorporate government policies such as Canadian Emergency Response Benefit (CERB) as well as shifts in consumption expenditures across hard-to -distance goods (e.g., travel, restaurants) and easy-to -distance goods (e.g., groceries). Differential impact on household incomes resulting from unemployment and reduced hours play an important role in driving household debt and savings. We highlight two other important channels. First, income replacement programs (notably CERB) only partially replace lost income for unemployed, previously middle-income households - which drives a rise in borrowing, particularly for those with mortgages. Second, upper-income households have relatively larger expenditures on hard-to-distance goods and so experience larger declines in consumption expenditures. This contributes to the high savings observed during March and April.
Subjects: 
Coronavirus disease (COVID-19)
Business fluctuations and cycles
Financial stability
JEL: 
E21
E24
G51
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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