the methodology of a report does not include

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The methods section describes actions taken to investigate a research problem and the rationale for the application of specific procedures or techniques used to identify, select, process, and analyze information applied to understanding the problem, thereby, allowing the reader to critically evaluate a study’s overall validity and reliability. The methodology section of a research paper answers two main questions: How was the data collected or generated? And, how was it analyzed? The writing should be direct and precise and always written in the past tense.

Kallet, Richard H. "How to Write the Methods Section of a Research Paper." Respiratory Care 49 (October 2004): 1229-1232.

Importance of a Good Methodology Section

You must explain how you obtained and analyzed your results for the following reasons:

• Readers need to know how the data was obtained because the method you chose affects the results and, by extension, how you interpreted their significance in the discussion section of your paper.
• Methodology is crucial for any branch of scholarship because an unreliable method produces unreliable results and, as a consequence, undermines the value of your analysis of the findings.
• In most cases, there are a variety of different methods you can choose to investigate a research problem. The methodology section of your paper should clearly articulate the reasons why you have chosen a particular procedure or technique.
• The reader wants to know that the data was collected or generated in a way that is consistent with accepted practice in the field of study. For example, if you are using a multiple choice questionnaire, readers need to know that it offered your respondents a reasonable range of answers to choose from.
• The method must be appropriate to fulfilling the overall aims of the study. For example, you need to ensure that you have a large enough sample size to be able to generalize and make recommendations based upon the findings.
• The methodology should discuss the problems that were anticipated and the steps you took to prevent them from occurring. For any problems that do arise, you must describe the ways in which they were minimized or why these problems do not impact in any meaningful way your interpretation of the findings.
• In the social and behavioral sciences, it is important to always provide sufficient information to allow other researchers to adopt or replicate your methodology. This information is particularly important when a new method has been developed or an innovative use of an existing method is utilized.

Bem, Daryl J. Writing the Empirical Journal Article. Psychology Writing Center. University of Washington; Denscombe, Martyn. The Good Research Guide: For Small-Scale Social Research Projects . 5th edition. Buckingham, UK: Open University Press, 2014; Lunenburg, Frederick C. Writing a Successful Thesis or Dissertation: Tips and Strategies for Students in the Social and Behavioral Sciences . Thousand Oaks, CA: Corwin Press, 2008.

Structure and Writing Style

I.  Groups of Research Methods

There are two main groups of research methods in the social sciences:

• The e mpirical-analytical group approaches the study of social sciences in a similar manner that researchers study the natural sciences . This type of research focuses on objective knowledge, research questions that can be answered yes or no, and operational definitions of variables to be measured. The empirical-analytical group employs deductive reasoning that uses existing theory as a foundation for formulating hypotheses that need to be tested. This approach is focused on explanation.
• The i nterpretative group of methods is focused on understanding phenomenon in a comprehensive, holistic way . Interpretive methods focus on analytically disclosing the meaning-making practices of human subjects [the why, how, or by what means people do what they do], while showing how those practices arrange so that it can be used to generate observable outcomes. Interpretive methods allow you to recognize your connection to the phenomena under investigation. However, the interpretative group requires careful examination of variables because it focuses more on subjective knowledge.

II.  Content

The introduction to your methodology section should begin by restating the research problem and underlying assumptions underpinning your study. This is followed by situating the methods you used to gather, analyze, and process information within the overall “tradition” of your field of study and within the particular research design you have chosen to study the problem. If the method you choose lies outside of the tradition of your field [i.e., your review of the literature demonstrates that the method is not commonly used], provide a justification for how your choice of methods specifically addresses the research problem in ways that have not been utilized in prior studies.

The remainder of your methodology section should describe the following:

• Decisions made in selecting the data you have analyzed or, in the case of qualitative research, the subjects and research setting you have examined,
• Tools and methods used to identify and collect information, and how you identified relevant variables,
• The ways in which you processed the data and the procedures you used to analyze that data, and
• The specific research tools or strategies that you utilized to study the underlying hypothesis and research questions.

In addition, an effectively written methodology section should:

• Introduce the overall methodological approach for investigating your research problem . Is your study qualitative or quantitative or a combination of both (mixed method)? Are you going to take a special approach, such as action research, or a more neutral stance?
• Indicate how the approach fits the overall research design . Your methods for gathering data should have a clear connection to your research problem. In other words, make sure that your methods will actually address the problem. One of the most common deficiencies found in research papers is that the proposed methodology is not suitable to achieving the stated objective of your paper.
• Describe the specific methods of data collection you are going to use , such as, surveys, interviews, questionnaires, observation, archival research. If you are analyzing existing data, such as a data set or archival documents, describe how it was originally created or gathered and by whom. Also be sure to explain how older data is still relevant to investigating the current research problem.
• Explain how you intend to analyze your results . Will you use statistical analysis? Will you use specific theoretical perspectives to help you analyze a text or explain observed behaviors? Describe how you plan to obtain an accurate assessment of relationships, patterns, trends, distributions, and possible contradictions found in the data.
• Provide background and a rationale for methodologies that are unfamiliar for your readers . Very often in the social sciences, research problems and the methods for investigating them require more explanation/rationale than widely accepted rules governing the natural and physical sciences. Be clear and concise in your explanation.
• Provide a justification for subject selection and sampling procedure . For instance, if you propose to conduct interviews, how do you intend to select the sample population? If you are analyzing texts, which texts have you chosen, and why? If you are using statistics, why is this set of data being used? If other data sources exist, explain why the data you chose is most appropriate to addressing the research problem.
• Provide a justification for case study selection . A common method of analyzing research problems in the social sciences is to analyze specific cases. These can be a person, place, event, phenomenon, or other type of subject of analysis that are either examined as a singular topic of in-depth investigation or multiple topics of investigation studied for the purpose of comparing or contrasting findings. In either method, you should explain why a case or cases were chosen and how they specifically relate to the research problem.
• Describe potential limitations . Are there any practical limitations that could affect your data collection? How will you attempt to control for potential confounding variables and errors? If your methodology may lead to problems you can anticipate, state this openly and show why pursuing this methodology outweighs the risk of these problems cropping up.

NOTE :   Once you have written all of the elements of the methods section, subsequent revisions should focus on how to present those elements as clearly and as logically as possibly. The description of how you prepared to study the research problem, how you gathered the data, and the protocol for analyzing the data should be organized chronologically. For clarity, when a large amount of detail must be presented, information should be presented in sub-sections according to topic. If necessary, consider using appendices for raw data.

ANOTHER NOTE : If you are conducting a qualitative analysis of a research problem , the methodology section generally requires a more elaborate description of the methods used as well as an explanation of the processes applied to gathering and analyzing of data than is generally required for studies using quantitative methods. Because you are the primary instrument for generating the data [e.g., through interviews or observations], the process for collecting that data has a significantly greater impact on producing the findings. Therefore, qualitative research requires a more detailed description of the methods used.

YET ANOTHER NOTE :   If your study involves interviews, observations, or other qualitative techniques involving human subjects , you may be required to obtain approval from the university's Office for the Protection of Research Subjects before beginning your research. This is not a common procedure for most undergraduate level student research assignments. However, i f your professor states you need approval, you must include a statement in your methods section that you received official endorsement and adequate informed consent from the office and that there was a clear assessment and minimization of risks to participants and to the university. This statement informs the reader that your study was conducted in an ethical and responsible manner. In some cases, the approval notice is included as an appendix to your paper.

III.  Problems to Avoid

Irrelevant Detail The methodology section of your paper should be thorough but concise. Do not provide any background information that does not directly help the reader understand why a particular method was chosen, how the data was gathered or obtained, and how the data was analyzed in relation to the research problem [note: analyzed, not interpreted! Save how you interpreted the findings for the discussion section]. With this in mind, the page length of your methods section will generally be less than any other section of your paper except the conclusion.

Unnecessary Explanation of Basic Procedures Remember that you are not writing a how-to guide about a particular method. You should make the assumption that readers possess a basic understanding of how to investigate the research problem on their own and, therefore, you do not have to go into great detail about specific methodological procedures. The focus should be on how you applied a method , not on the mechanics of doing a method. An exception to this rule is if you select an unconventional methodological approach; if this is the case, be sure to explain why this approach was chosen and how it enhances the overall process of discovery.

Problem Blindness It is almost a given that you will encounter problems when collecting or generating your data, or, gaps will exist in existing data or archival materials. Do not ignore these problems or pretend they did not occur. Often, documenting how you overcame obstacles can form an interesting part of the methodology. It demonstrates to the reader that you can provide a cogent rationale for the decisions you made to minimize the impact of any problems that arose.

Literature Review Just as the literature review section of your paper provides an overview of sources you have examined while researching a particular topic, the methodology section should cite any sources that informed your choice and application of a particular method [i.e., the choice of a survey should include any citations to the works you used to help construct the survey].

It’s More than Sources of Information! A description of a research study's method should not be confused with a description of the sources of information. Such a list of sources is useful in and of itself, especially if it is accompanied by an explanation about the selection and use of the sources. The description of the project's methodology complements a list of sources in that it sets forth the organization and interpretation of information emanating from those sources.

Azevedo, L.F. et al. "How to Write a Scientific Paper: Writing the Methods Section." Revista Portuguesa de Pneumologia 17 (2011): 232-238; Blair Lorrie. “Choosing a Methodology.” In Writing a Graduate Thesis or Dissertation , Teaching Writing Series. (Rotterdam: Sense Publishers 2016), pp. 49-72; Butin, Dan W. The Education Dissertation A Guide for Practitioner Scholars . Thousand Oaks, CA: Corwin, 2010; Carter, Susan. Structuring Your Research Thesis . New York: Palgrave Macmillan, 2012; Kallet, Richard H. “How to Write the Methods Section of a Research Paper.” Respiratory Care 49 (October 2004):1229-1232; Lunenburg, Frederick C. Writing a Successful Thesis or Dissertation: Tips and Strategies for Students in the Social and Behavioral Sciences . Thousand Oaks, CA: Corwin Press, 2008. Methods Section. The Writer’s Handbook. Writing Center. University of Wisconsin, Madison; Rudestam, Kjell Erik and Rae R. Newton. “The Method Chapter: Describing Your Research Plan.” In Surviving Your Dissertation: A Comprehensive Guide to Content and Process . (Thousand Oaks, Sage Publications, 2015), pp. 87-115; What is Interpretive Research. Institute of Public and International Affairs, University of Utah; Writing the Experimental Report: Methods, Results, and Discussion. The Writing Lab and The OWL. Purdue University; Methods and Materials. The Structure, Format, Content, and Style of a Journal-Style Scientific Paper. Department of Biology. Bates College.

Writing Tip

Statistical Designs and Tests? Do Not Fear Them!

Don't avoid using a quantitative approach to analyzing your research problem just because you fear the idea of applying statistical designs and tests. A qualitative approach, such as conducting interviews or content analysis of archival texts, can yield exciting new insights about a research problem, but it should not be undertaken simply because you have a disdain for running a simple regression. A well designed quantitative research study can often be accomplished in very clear and direct ways, whereas, a similar study of a qualitative nature usually requires considerable time to analyze large volumes of data and a tremendous burden to create new paths for analysis where previously no path associated with your research problem had existed.

To locate data and statistics, GO HERE .

Another Writing Tip

Knowing the Relationship Between Theories and Methods

There can be multiple meaning associated with the term "theories" and the term "methods" in social sciences research. A helpful way to delineate between them is to understand "theories" as representing different ways of characterizing the social world when you research it and "methods" as representing different ways of generating and analyzing data about that social world. Framed in this way, all empirical social sciences research involves theories and methods, whether they are stated explicitly or not. However, while theories and methods are often related, it is important that, as a researcher, you deliberately separate them in order to avoid your theories playing a disproportionate role in shaping what outcomes your chosen methods produce.

Introspectively engage in an ongoing dialectic between the application of theories and methods to help enable you to use the outcomes from your methods to interrogate and develop new theories, or ways of framing conceptually the research problem. This is how scholarship grows and branches out into new intellectual territory.

Reynolds, R. Larry. Ways of Knowing. Alternative Microeconomics . Part 1, Chapter 3. Boise State University; The Theory-Method Relationship. S-Cool Revision. United Kingdom.

Yet Another Writing Tip

Methods and the Methodology

Do not confuse the terms "methods" and "methodology." As Schneider notes, a method refers to the technical steps taken to do research . Descriptions of methods usually include defining and stating why you have chosen specific techniques to investigate a research problem, followed by an outline of the procedures you used to systematically select, gather, and process the data [remember to always save the interpretation of data for the discussion section of your paper].

The methodology refers to a discussion of the underlying reasoning why particular methods were used . This discussion includes describing the theoretical concepts that inform the choice of methods to be applied, placing the choice of methods within the more general nature of academic work, and reviewing its relevance to examining the research problem. The methodology section also includes a thorough review of the methods other scholars have used to study the topic.

Bryman, Alan. "Of Methods and Methodology." Qualitative Research in Organizations and Management: An International Journal 3 (2008): 159-168; Schneider, Florian. “What's in a Methodology: The Difference between Method, Methodology, and Theory…and How to Get the Balance Right?” PoliticsEastAsia.com. Chinese Department, University of Leiden, Netherlands.

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• What Is a Research Methodology? | Steps & Tips

What Is a Research Methodology? | Steps & Tips

Published on 25 February 2019 by Shona McCombes . Revised on 10 October 2022.

Your research methodology discusses and explains the data collection and analysis methods you used in your research. A key part of your thesis, dissertation, or research paper, the methodology chapter explains what you did and how you did it, allowing readers to evaluate the reliability and validity of your research.

It should include:

• The type of research you conducted
• How you collected and analysed your data
• Any tools or materials you used in the research
• Why you chose these methods
• Your methodology section should generally be written in the past tense .
• Academic style guides in your field may provide detailed guidelines on what to include for different types of studies.
• Your citation style might provide guidelines for your methodology section (e.g., an APA Style methods section ).

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Table of contents

How to write a research methodology, why is a methods section important, step 1: explain your methodological approach, step 2: describe your data collection methods, step 3: describe your analysis method, step 4: evaluate and justify the methodological choices you made, tips for writing a strong methodology chapter, frequently asked questions about methodology.

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Your methods section is your opportunity to share how you conducted your research and why you chose the methods you chose. It’s also the place to show that your research was rigorously conducted and can be replicated .

It gives your research legitimacy and situates it within your field, and also gives your readers a place to refer to if they have any questions or critiques in other sections.

You can start by introducing your overall approach to your research. You have two options here.

Option 1: Start with your “what”

What research problem or question did you investigate?

• Aim to describe the characteristics of something?
• Explore an under-researched topic?
• Establish a causal relationship?

And what type of data did you need to achieve this aim?

• Quantitative data , qualitative data , or a mix of both?
• Primary data collected yourself, or secondary data collected by someone else?
• Experimental data gathered by controlling and manipulating variables, or descriptive data gathered via observations?

Option 2: Start with your “why”

Depending on your discipline, you can also start with a discussion of the rationale and assumptions underpinning your methodology. In other words, why did you choose these methods for your study?

• Why is this the best way to answer your research question?
• Is this a standard methodology in your field, or does it require justification?
• Were there any ethical considerations involved in your choices?
• What are the criteria for validity and reliability in this type of research ?

Once you have introduced your reader to your methodological approach, you should share full details about your data collection methods .

Quantitative methods

In order to be considered generalisable, you should describe quantitative research methods in enough detail for another researcher to replicate your study.

Here, explain how you operationalised your concepts and measured your variables. Discuss your sampling method or inclusion/exclusion criteria, as well as any tools, procedures, and materials you used to gather your data.

Surveys Describe where, when, and how the survey was conducted.

• How did you design the questionnaire?
• What form did your questions take (e.g., multiple choice, Likert scale )?
• Were your surveys conducted in-person or virtually?
• What sampling method did you use to select participants?
• What was your sample size and response rate?

Experiments Share full details of the tools, techniques, and procedures you used to conduct your experiment.

• How did you design the experiment ?
• How did you recruit participants?
• How did you manipulate and measure the variables ?
• What tools did you use?

Existing data Explain how you gathered and selected the material (such as datasets or archival data) that you used in your analysis.

• Where did you source the material?
• How was the data originally produced?
• What criteria did you use to select material (e.g., date range)?

The survey consisted of 5 multiple-choice questions and 10 questions measured on a 7-point Likert scale.

The goal was to collect survey responses from 350 customers visiting the fitness apparel company’s brick-and-mortar location in Boston on 4–8 July 2022, between 11:00 and 15:00.

Here, a customer was defined as a person who had purchased a product from the company on the day they took the survey. Participants were given 5 minutes to fill in the survey anonymously. In total, 408 customers responded, but not all surveys were fully completed. Due to this, 371 survey results were included in the analysis.

Qualitative methods

In qualitative research , methods are often more flexible and subjective. For this reason, it’s crucial to robustly explain the methodology choices you made.

Be sure to discuss the criteria you used to select your data, the context in which your research was conducted, and the role you played in collecting your data (e.g., were you an active participant, or a passive observer?)

Interviews or focus groups Describe where, when, and how the interviews were conducted.

• How did you find and select participants?
• How many participants took part?
• What form did the interviews take ( structured , semi-structured , or unstructured )?
• How long were the interviews?
• How were they recorded?

Participant observation Describe where, when, and how you conducted the observation or ethnography .

• What group or community did you observe? How long did you spend there?
• How did you gain access to this group? What role did you play in the community?
• How long did you spend conducting the research? Where was it located?
• How did you record your data (e.g., audiovisual recordings, note-taking)?

Existing data Explain how you selected case study materials for your analysis.

• What type of materials did you analyse?
• How did you select them?

In order to gain better insight into possibilities for future improvement of the fitness shop’s product range, semi-structured interviews were conducted with 8 returning customers.

Here, a returning customer was defined as someone who usually bought products at least twice a week from the store.

Surveys were used to select participants. Interviews were conducted in a small office next to the cash register and lasted approximately 20 minutes each. Answers were recorded by note-taking, and seven interviews were also filmed with consent. One interviewee preferred not to be filmed.

Mixed methods

Mixed methods research combines quantitative and qualitative approaches. If a standalone quantitative or qualitative study is insufficient to answer your research question, mixed methods may be a good fit for you.

Mixed methods are less common than standalone analyses, largely because they require a great deal of effort to pull off successfully. If you choose to pursue mixed methods, it’s especially important to robustly justify your methods here.

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Next, you should indicate how you processed and analysed your data. Avoid going into too much detail: you should not start introducing or discussing any of your results at this stage.

In quantitative research , your analysis will be based on numbers. In your methods section, you can include:

• How you prepared the data before analysing it (e.g., checking for missing data , removing outliers , transforming variables)
• Which software you used (e.g., SPSS, Stata or R)
• Which statistical tests you used (e.g., two-tailed t test , simple linear regression )

In qualitative research, your analysis will be based on language, images, and observations (often involving some form of textual analysis ).

Specific methods might include:

• Content analysis : Categorising and discussing the meaning of words, phrases and sentences
• Thematic analysis : Coding and closely examining the data to identify broad themes and patterns
• Discourse analysis : Studying communication and meaning in relation to their social context

Mixed methods combine the above two research methods, integrating both qualitative and quantitative approaches into one coherent analytical process.

Above all, your methodology section should clearly make the case for why you chose the methods you did. This is especially true if you did not take the most standard approach to your topic. In this case, discuss why other methods were not suitable for your objectives, and show how this approach contributes new knowledge or understanding.

In any case, it should be overwhelmingly clear to your reader that you set yourself up for success in terms of your methodology’s design. Show how your methods should lead to results that are valid and reliable, while leaving the analysis of the meaning, importance, and relevance of your results for your discussion section .

• Quantitative: Lab-based experiments cannot always accurately simulate real-life situations and behaviours, but they are effective for testing causal relationships between variables .
• Qualitative: Unstructured interviews usually produce results that cannot be generalised beyond the sample group , but they provide a more in-depth understanding of participants’ perceptions, motivations, and emotions.
• Mixed methods: Despite issues systematically comparing differing types of data, a solely quantitative study would not sufficiently incorporate the lived experience of each participant, while a solely qualitative study would be insufficiently generalisable.

Remember that your aim is not just to describe your methods, but to show how and why you applied them. Again, it’s critical to demonstrate that your research was rigorously conducted and can be replicated.

1. Focus on your objectives and research questions

The methodology section should clearly show why your methods suit your objectives  and convince the reader that you chose the best possible approach to answering your problem statement and research questions .

2. Cite relevant sources

Your methodology can be strengthened by referencing existing research in your field. This can help you to:

• Show that you followed established practice for your type of research
• Discuss how you decided on your approach by evaluating existing research
• Present a novel methodological approach to address a gap in the literature

3. Write for your audience

Consider how much information you need to give, and avoid getting too lengthy. If you are using methods that are standard for your discipline, you probably don’t need to give a lot of background or justification.

Regardless, your methodology should be a clear, well-structured text that makes an argument for your approach, not just a list of technical details and procedures.

Methodology refers to the overarching strategy and rationale of your research. Developing your methodology involves studying the research methods used in your field and the theories or principles that underpin them, in order to choose the approach that best matches your objectives.

Methods are the specific tools and procedures you use to collect and analyse data (e.g. interviews, experiments , surveys , statistical tests ).

In a dissertation or scientific paper, the methodology chapter or methods section comes after the introduction and before the results , discussion and conclusion .

Depending on the length and type of document, you might also include a literature review or theoretical framework before the methodology.

Quantitative research deals with numbers and statistics, while qualitative research deals with words and meanings.

Quantitative methods allow you to test a hypothesis by systematically collecting and analysing data, while qualitative methods allow you to explore ideas and experiences in depth.

A sample is a subset of individuals from a larger population. Sampling means selecting the group that you will actually collect data from in your research.

For example, if you are researching the opinions of students in your university, you could survey a sample of 100 students.

Statistical sampling allows you to test a hypothesis about the characteristics of a population. There are various sampling methods you can use to ensure that your sample is representative of the population as a whole.

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Research Methodology – Types, Examples and writing Guide

Table of Contents

Research Methodology

Definition:

Research Methodology refers to the systematic and scientific approach used to conduct research, investigate problems, and gather data and information for a specific purpose. It involves the techniques and procedures used to identify, collect , analyze , and interpret data to answer research questions or solve research problems . Moreover, They are philosophical and theoretical frameworks that guide the research process.

Structure of Research Methodology

Research methodology formats can vary depending on the specific requirements of the research project, but the following is a basic example of a structure for a research methodology section:

I. Introduction

• Provide an overview of the research problem and the need for a research methodology section
• Outline the main research questions and objectives

II. Research Design

• Explain the research design chosen and why it is appropriate for the research question(s) and objectives
• Discuss any alternative research designs considered and why they were not chosen
• Describe the research setting and participants (if applicable)

III. Data Collection Methods

• Describe the methods used to collect data (e.g., surveys, interviews, observations)
• Explain how the data collection methods were chosen and why they are appropriate for the research question(s) and objectives
• Detail any procedures or instruments used for data collection

IV. Data Analysis Methods

• Describe the methods used to analyze the data (e.g., statistical analysis, content analysis )
• Explain how the data analysis methods were chosen and why they are appropriate for the research question(s) and objectives
• Detail any procedures or software used for data analysis

V. Ethical Considerations

• Discuss any ethical issues that may arise from the research and how they were addressed
• Explain how informed consent was obtained (if applicable)
• Detail any measures taken to ensure confidentiality and anonymity

VI. Limitations

• Identify any potential limitations of the research methodology and how they may impact the results and conclusions

VII. Conclusion

• Summarize the key aspects of the research methodology section
• Explain how the research methodology addresses the research question(s) and objectives

Research Methodology Types

Types of Research Methodology are as follows:

Quantitative Research Methodology

This is a research methodology that involves the collection and analysis of numerical data using statistical methods. This type of research is often used to study cause-and-effect relationships and to make predictions.

Qualitative Research Methodology

This is a research methodology that involves the collection and analysis of non-numerical data such as words, images, and observations. This type of research is often used to explore complex phenomena, to gain an in-depth understanding of a particular topic, and to generate hypotheses.

Mixed-Methods Research Methodology

This is a research methodology that combines elements of both quantitative and qualitative research. This approach can be particularly useful for studies that aim to explore complex phenomena and to provide a more comprehensive understanding of a particular topic.

Case Study Research Methodology

This is a research methodology that involves in-depth examination of a single case or a small number of cases. Case studies are often used in psychology, sociology, and anthropology to gain a detailed understanding of a particular individual or group.

Action Research Methodology

This is a research methodology that involves a collaborative process between researchers and practitioners to identify and solve real-world problems. Action research is often used in education, healthcare, and social work.

Experimental Research Methodology

This is a research methodology that involves the manipulation of one or more independent variables to observe their effects on a dependent variable. Experimental research is often used to study cause-and-effect relationships and to make predictions.

Survey Research Methodology

This is a research methodology that involves the collection of data from a sample of individuals using questionnaires or interviews. Survey research is often used to study attitudes, opinions, and behaviors.

Grounded Theory Research Methodology

This is a research methodology that involves the development of theories based on the data collected during the research process. Grounded theory is often used in sociology and anthropology to generate theories about social phenomena.

Research Methodology Example

An Example of Research Methodology could be the following:

Research Methodology for Investigating the Effectiveness of Cognitive Behavioral Therapy in Reducing Symptoms of Depression in Adults

Introduction:

The aim of this research is to investigate the effectiveness of cognitive-behavioral therapy (CBT) in reducing symptoms of depression in adults. To achieve this objective, a randomized controlled trial (RCT) will be conducted using a mixed-methods approach.

Research Design:

The study will follow a pre-test and post-test design with two groups: an experimental group receiving CBT and a control group receiving no intervention. The study will also include a qualitative component, in which semi-structured interviews will be conducted with a subset of participants to explore their experiences of receiving CBT.

Participants:

Participants will be recruited from community mental health clinics in the local area. The sample will consist of 100 adults aged 18-65 years old who meet the diagnostic criteria for major depressive disorder. Participants will be randomly assigned to either the experimental group or the control group.

Intervention :

The experimental group will receive 12 weekly sessions of CBT, each lasting 60 minutes. The intervention will be delivered by licensed mental health professionals who have been trained in CBT. The control group will receive no intervention during the study period.

Data Collection:

Quantitative data will be collected through the use of standardized measures such as the Beck Depression Inventory-II (BDI-II) and the Generalized Anxiety Disorder-7 (GAD-7). Data will be collected at baseline, immediately after the intervention, and at a 3-month follow-up. Qualitative data will be collected through semi-structured interviews with a subset of participants from the experimental group. The interviews will be conducted at the end of the intervention period, and will explore participants’ experiences of receiving CBT.

Data Analysis:

Quantitative data will be analyzed using descriptive statistics, t-tests, and mixed-model analyses of variance (ANOVA) to assess the effectiveness of the intervention. Qualitative data will be analyzed using thematic analysis to identify common themes and patterns in participants’ experiences of receiving CBT.

Ethical Considerations:

This study will comply with ethical guidelines for research involving human subjects. Participants will provide informed consent before participating in the study, and their privacy and confidentiality will be protected throughout the study. Any adverse events or reactions will be reported and managed appropriately.

Data Management:

All data collected will be kept confidential and stored securely using password-protected databases. Identifying information will be removed from qualitative data transcripts to ensure participants’ anonymity.

Limitations:

One potential limitation of this study is that it only focuses on one type of psychotherapy, CBT, and may not generalize to other types of therapy or interventions. Another limitation is that the study will only include participants from community mental health clinics, which may not be representative of the general population.

Conclusion:

This research aims to investigate the effectiveness of CBT in reducing symptoms of depression in adults. By using a randomized controlled trial and a mixed-methods approach, the study will provide valuable insights into the mechanisms underlying the relationship between CBT and depression. The results of this study will have important implications for the development of effective treatments for depression in clinical settings.

How to Write Research Methodology

Writing a research methodology involves explaining the methods and techniques you used to conduct research, collect data, and analyze results. It’s an essential section of any research paper or thesis, as it helps readers understand the validity and reliability of your findings. Here are the steps to write a research methodology:

• Start by explaining your research question: Begin the methodology section by restating your research question and explaining why it’s important. This helps readers understand the purpose of your research and the rationale behind your methods.
• Describe your research design: Explain the overall approach you used to conduct research. This could be a qualitative or quantitative research design, experimental or non-experimental, case study or survey, etc. Discuss the advantages and limitations of the chosen design.
• Discuss your sample: Describe the participants or subjects you included in your study. Include details such as their demographics, sampling method, sample size, and any exclusion criteria used.
• Describe your data collection methods : Explain how you collected data from your participants. This could include surveys, interviews, observations, questionnaires, or experiments. Include details on how you obtained informed consent, how you administered the tools, and how you minimized the risk of bias.
• Explain your data analysis techniques: Describe the methods you used to analyze the data you collected. This could include statistical analysis, content analysis, thematic analysis, or discourse analysis. Explain how you dealt with missing data, outliers, and any other issues that arose during the analysis.
• Discuss the validity and reliability of your research : Explain how you ensured the validity and reliability of your study. This could include measures such as triangulation, member checking, peer review, or inter-coder reliability.
• Acknowledge any limitations of your research: Discuss any limitations of your study, including any potential threats to validity or generalizability. This helps readers understand the scope of your findings and how they might apply to other contexts.
• Provide a summary: End the methodology section by summarizing the methods and techniques you used to conduct your research. This provides a clear overview of your research methodology and helps readers understand the process you followed to arrive at your findings.

When to Write Research Methodology

Research methodology is typically written after the research proposal has been approved and before the actual research is conducted. It should be written prior to data collection and analysis, as it provides a clear roadmap for the research project.

The research methodology is an important section of any research paper or thesis, as it describes the methods and procedures that will be used to conduct the research. It should include details about the research design, data collection methods, data analysis techniques, and any ethical considerations.

The methodology should be written in a clear and concise manner, and it should be based on established research practices and standards. It is important to provide enough detail so that the reader can understand how the research was conducted and evaluate the validity of the results.

Applications of Research Methodology

Here are some of the applications of research methodology:

• To identify the research problem: Research methodology is used to identify the research problem, which is the first step in conducting any research.
• To design the research: Research methodology helps in designing the research by selecting the appropriate research method, research design, and sampling technique.
• To collect data: Research methodology provides a systematic approach to collect data from primary and secondary sources.
• To analyze data: Research methodology helps in analyzing the collected data using various statistical and non-statistical techniques.
• To test hypotheses: Research methodology provides a framework for testing hypotheses and drawing conclusions based on the analysis of data.
• To generalize findings: Research methodology helps in generalizing the findings of the research to the target population.
• To develop theories : Research methodology is used to develop new theories and modify existing theories based on the findings of the research.
• To evaluate programs and policies : Research methodology is used to evaluate the effectiveness of programs and policies by collecting data and analyzing it.
• To improve decision-making: Research methodology helps in making informed decisions by providing reliable and valid data.

Purpose of Research Methodology

Research methodology serves several important purposes, including:

• To guide the research process: Research methodology provides a systematic framework for conducting research. It helps researchers to plan their research, define their research questions, and select appropriate methods and techniques for collecting and analyzing data.
• To ensure research quality: Research methodology helps researchers to ensure that their research is rigorous, reliable, and valid. It provides guidelines for minimizing bias and error in data collection and analysis, and for ensuring that research findings are accurate and trustworthy.
• To replicate research: Research methodology provides a clear and detailed account of the research process, making it possible for other researchers to replicate the study and verify its findings.
• To advance knowledge: Research methodology enables researchers to generate new knowledge and to contribute to the body of knowledge in their field. It provides a means for testing hypotheses, exploring new ideas, and discovering new insights.
• To inform decision-making: Research methodology provides evidence-based information that can inform policy and decision-making in a variety of fields, including medicine, public health, education, and business.

Advantages of Research Methodology

Research methodology has several advantages that make it a valuable tool for conducting research in various fields. Here are some of the key advantages of research methodology:

• Systematic and structured approach : Research methodology provides a systematic and structured approach to conducting research, which ensures that the research is conducted in a rigorous and comprehensive manner.
• Objectivity : Research methodology aims to ensure objectivity in the research process, which means that the research findings are based on evidence and not influenced by personal bias or subjective opinions.
• Replicability : Research methodology ensures that research can be replicated by other researchers, which is essential for validating research findings and ensuring their accuracy.
• Reliability : Research methodology aims to ensure that the research findings are reliable, which means that they are consistent and can be depended upon.
• Validity : Research methodology ensures that the research findings are valid, which means that they accurately reflect the research question or hypothesis being tested.
• Efficiency : Research methodology provides a structured and efficient way of conducting research, which helps to save time and resources.
• Flexibility : Research methodology allows researchers to choose the most appropriate research methods and techniques based on the research question, data availability, and other relevant factors.
• Scope for innovation: Research methodology provides scope for innovation and creativity in designing research studies and developing new research techniques.

Research Methodology Vs Research Methods

About the author.

Muhammad Hassan

Researcher, Academic Writer, Web developer

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What is Research Methodology? Definition, Types, and Examples

Research methodology 1,2 is a structured and scientific approach used to collect, analyze, and interpret quantitative or qualitative data to answer research questions or test hypotheses. A research methodology is like a plan for carrying out research and helps keep researchers on track by limiting the scope of the research. Several aspects must be considered before selecting an appropriate research methodology, such as research limitations and ethical concerns that may affect your research.

The research methodology section in a scientific paper describes the different methodological choices made, such as the data collection and analysis methods, and why these choices were selected. The reasons should explain why the methods chosen are the most appropriate to answer the research question. A good research methodology also helps ensure the reliability and validity of the research findings. There are three types of research methodology—quantitative, qualitative, and mixed-method, which can be chosen based on the research objectives.

What is research methodology ?

A research methodology describes the techniques and procedures used to identify and analyze information regarding a specific research topic. It is a process by which researchers design their study so that they can achieve their objectives using the selected research instruments. It includes all the important aspects of research, including research design, data collection methods, data analysis methods, and the overall framework within which the research is conducted. While these points can help you understand what is research methodology, you also need to know why it is important to pick the right methodology.

Why is research methodology important?

Having a good research methodology in place has the following advantages: 3

• Helps other researchers who may want to replicate your research; the explanations will be of benefit to them.
• You can easily answer any questions about your research if they arise at a later stage.
• A research methodology provides a framework and guidelines for researchers to clearly define research questions, hypotheses, and objectives.
• It helps researchers identify the most appropriate research design, sampling technique, and data collection and analysis methods.
• A sound research methodology helps researchers ensure that their findings are valid and reliable and free from biases and errors.
• It also helps ensure that ethical guidelines are followed while conducting research.
• A good research methodology helps researchers in planning their research efficiently, by ensuring optimum usage of their time and resources.

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Types of research methodology.

There are three types of research methodology based on the type of research and the data required. 1

• Quantitative research methodology focuses on measuring and testing numerical data. This approach is good for reaching a large number of people in a short amount of time. This type of research helps in testing the causal relationships between variables, making predictions, and generalizing results to wider populations.
• Qualitative research methodology examines the opinions, behaviors, and experiences of people. It collects and analyzes words and textual data. This research methodology requires fewer participants but is still more time consuming because the time spent per participant is quite large. This method is used in exploratory research where the research problem being investigated is not clearly defined.
• Mixed-method research methodology uses the characteristics of both quantitative and qualitative research methodologies in the same study. This method allows researchers to validate their findings, verify if the results observed using both methods are complementary, and explain any unexpected results obtained from one method by using the other method.

What are the types of sampling designs in research methodology?

Sampling 4 is an important part of a research methodology and involves selecting a representative sample of the population to conduct the study, making statistical inferences about them, and estimating the characteristics of the whole population based on these inferences. There are two types of sampling designs in research methodology—probability and nonprobability.

• Probability sampling

In this type of sampling design, a sample is chosen from a larger population using some form of random selection, that is, every member of the population has an equal chance of being selected. The different types of probability sampling are:

• Systematic —sample members are chosen at regular intervals. It requires selecting a starting point for the sample and sample size determination that can be repeated at regular intervals. This type of sampling method has a predefined range; hence, it is the least time consuming.
• Stratified —researchers divide the population into smaller groups that don’t overlap but represent the entire population. While sampling, these groups can be organized, and then a sample can be drawn from each group separately.
• Cluster —the population is divided into clusters based on demographic parameters like age, sex, location, etc.
• Convenience —selects participants who are most easily accessible to researchers due to geographical proximity, availability at a particular time, etc.
• Purposive —participants are selected at the researcher’s discretion. Researchers consider the purpose of the study and the understanding of the target audience.
• Snowball —already selected participants use their social networks to refer the researcher to other potential participants.
• Quota —while designing the study, the researchers decide how many people with which characteristics to include as participants. The characteristics help in choosing people most likely to provide insights into the subject.

What are data collection methods?

During research, data are collected using various methods depending on the research methodology being followed and the research methods being undertaken. Both qualitative and quantitative research have different data collection methods, as listed below.

Qualitative research 5

• One-on-one interviews: Helps the interviewers understand a respondent’s subjective opinion and experience pertaining to a specific topic or event
• Document study/literature review/record keeping: Researchers’ review of already existing written materials such as archives, annual reports, research articles, guidelines, policy documents, etc.
• Focus groups: Constructive discussions that usually include a small sample of about 6-10 people and a moderator, to understand the participants’ opinion on a given topic.
• Qualitative observation : Researchers collect data using their five senses (sight, smell, touch, taste, and hearing).

Quantitative research 6

• Sampling: The most common type is probability sampling.
• Interviews: Commonly telephonic or done in-person.
• Observations: Structured observations are most commonly used in quantitative research. In this method, researchers make observations about specific behaviors of individuals in a structured setting.
• Document review: Reviewing existing research or documents to collect evidence for supporting the research.
• Surveys and questionnaires. Surveys can be administered both online and offline depending on the requirement and sample size.

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What are data analysis methods.

The data collected using the various methods for qualitative and quantitative research need to be analyzed to generate meaningful conclusions. These data analysis methods 7 also differ between quantitative and qualitative research.

Quantitative research involves a deductive method for data analysis where hypotheses are developed at the beginning of the research and precise measurement is required. The methods include statistical analysis applications to analyze numerical data and are grouped into two categories—descriptive and inferential.

Descriptive analysis is used to describe the basic features of different types of data to present it in a way that ensures the patterns become meaningful. The different types of descriptive analysis methods are:

• Measures of frequency (count, percent, frequency)
• Measures of central tendency (mean, median, mode)
• Measures of dispersion or variation (range, variance, standard deviation)
• Measure of position (percentile ranks, quartile ranks)

Inferential analysis is used to make predictions about a larger population based on the analysis of the data collected from a smaller population. This analysis is used to study the relationships between different variables. Some commonly used inferential data analysis methods are:

• Correlation: To understand the relationship between two or more variables.
• Cross-tabulation: Analyze the relationship between multiple variables.
• Regression analysis: Study the impact of independent variables on the dependent variable.
• Frequency tables: To understand the frequency of data.
• Analysis of variance: To test the degree to which two or more variables differ in an experiment.

Qualitative research involves an inductive method for data analysis where hypotheses are developed after data collection. The methods include:

• Content analysis: For analyzing documented information from text and images by determining the presence of certain words or concepts in texts.
• Narrative analysis: For analyzing content obtained from sources such as interviews, field observations, and surveys. The stories and opinions shared by people are used to answer research questions.
• Discourse analysis: For analyzing interactions with people considering the social context, that is, the lifestyle and environment, under which the interaction occurs.
• Grounded theory: Involves hypothesis creation by data collection and analysis to explain why a phenomenon occurred.
• Thematic analysis: To identify important themes or patterns in data and use these to address an issue.

How to choose a research methodology?

Here are some important factors to consider when choosing a research methodology: 8

• Research objectives, aims, and questions —these would help structure the research design.
• Review existing literature to identify any gaps in knowledge.
• Check the statistical requirements —if data-driven or statistical results are needed then quantitative research is the best. If the research questions can be answered based on people’s opinions and perceptions, then qualitative research is most suitable.
• Sample size —sample size can often determine the feasibility of a research methodology. For a large sample, less effort- and time-intensive methods are appropriate.
• Constraints —constraints of time, geography, and resources can help define the appropriate methodology.

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How to write a research methodology .

A research methodology should include the following components: 3,9

• Research design —should be selected based on the research question and the data required. Common research designs include experimental, quasi-experimental, correlational, descriptive, and exploratory.
• Research method —this can be quantitative, qualitative, or mixed-method.
• Reason for selecting a specific methodology —explain why this methodology is the most suitable to answer your research problem.
• Research instruments —explain the research instruments you plan to use, mainly referring to the data collection methods such as interviews, surveys, etc. Here as well, a reason should be mentioned for selecting the particular instrument.
• Sampling —this involves selecting a representative subset of the population being studied.
• Data collection —involves gathering data using several data collection methods, such as surveys, interviews, etc.
• Data analysis —describe the data analysis methods you will use once you’ve collected the data.
• Research limitations —mention any limitations you foresee while conducting your research.
• Validity and reliability —validity helps identify the accuracy and truthfulness of the findings; reliability refers to the consistency and stability of the results over time and across different conditions.
• Ethical considerations —research should be conducted ethically. The considerations include obtaining consent from participants, maintaining confidentiality, and addressing conflicts of interest.

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Frequently Asked Questions

Q1. What are the key components of research methodology?

A1. A good research methodology has the following key components:

• Research design
• Data collection procedures
• Data analysis methods
• Ethical considerations

Q2. Why is ethical consideration important in research methodology?

A2. Ethical consideration is important in research methodology to ensure the readers of the reliability and validity of the study. Researchers must clearly mention the ethical norms and standards followed during the conduct of the research and also mention if the research has been cleared by any institutional board. The following 10 points are the important principles related to ethical considerations: 10

• Participants should not be subjected to harm.
• Respect for the dignity of participants should be prioritized.
• Full consent should be obtained from participants before the study.
• Participants’ privacy should be ensured.
• Confidentiality of the research data should be ensured.
• Anonymity of individuals and organizations participating in the research should be maintained.
• The aims and objectives of the research should not be exaggerated.
• Affiliations, sources of funding, and any possible conflicts of interest should be declared.
• Communication in relation to the research should be honest and transparent.
• Misleading information and biased representation of primary data findings should be avoided.

Q3. What is the difference between methodology and method?

A3. Research methodology is different from a research method, although both terms are often confused. Research methods are the tools used to gather data, while the research methodology provides a framework for how research is planned, conducted, and analyzed. The latter guides researchers in making decisions about the most appropriate methods for their research. Research methods refer to the specific techniques, procedures, and tools used by researchers to collect, analyze, and interpret data, for instance surveys, questionnaires, interviews, etc.

Research methodology is, thus, an integral part of a research study. It helps ensure that you stay on track to meet your research objectives and answer your research questions using the most appropriate data collection and analysis tools based on your research design.

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• Research methodologies. Pfeiffer Library website. Accessed August 15, 2023. https://library.tiffin.edu/researchmethodologies/whatareresearchmethodologies
• Types of research methodology. Eduvoice website. Accessed August 16, 2023. https://eduvoice.in/types-research-methodology/
• The basics of research methodology: A key to quality research. Voxco. Accessed August 16, 2023. https://www.voxco.com/blog/what-is-research-methodology/
• Sampling methods: Types with examples. QuestionPro website. Accessed August 16, 2023. https://www.questionpro.com/blog/types-of-sampling-for-social-research/
• What is qualitative research? Methods, types, approaches, examples. Researcher.Life blog. Accessed August 15, 2023. https://researcher.life/blog/article/what-is-qualitative-research-methods-types-examples/
• What is quantitative research? Definition, methods, types, and examples. Researcher.Life blog. Accessed August 15, 2023. https://researcher.life/blog/article/what-is-quantitative-research-types-and-examples/
• Data analysis in research: Types & methods. QuestionPro website. Accessed August 16, 2023. https://www.questionpro.com/blog/data-analysis-in-research/#Data_analysis_in_qualitative_research
• Factors to consider while choosing the right research methodology. PhD Monster website. Accessed August 17, 2023. https://www.phdmonster.com/factors-to-consider-while-choosing-the-right-research-methodology/
• What is research methodology? Research and writing guides. Accessed August 14, 2023. https://paperpile.com/g/what-is-research-methodology/
• Ethical considerations. Business research methodology website. Accessed August 17, 2023. https://research-methodology.net/research-methodology/ethical-considerations/

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What Is Research Methodology? A Plain-Language Explanation & Definition (With Examples)

By Derek Jansen (MBA)  and Kerryn Warren (PhD) | June 2020 (Last updated April 2023)

If you’re new to formal academic research, it’s quite likely that you’re feeling a little overwhelmed by all the technical lingo that gets thrown around. And who could blame you – “research methodology”, “research methods”, “sampling strategies”… it all seems never-ending!

In this post, we’ll demystify the landscape with plain-language explanations and loads of examples (including easy-to-follow videos), so that you can approach your dissertation, thesis or research project with confidence. Let’s get started.

Research Methodology 101

• What exactly research methodology means
• What qualitative , quantitative and mixed methods are
• What sampling strategy is
• What data collection methods are
• What data analysis methods are
• How to choose your research methodology
• Example of a research methodology

What is research methodology?

Research methodology simply refers to the practical “how” of a research study. More specifically, it’s about how  a researcher  systematically designs a study  to ensure valid and reliable results that address the research aims, objectives and research questions . Specifically, how the researcher went about deciding:

• What type of data to collect (e.g., qualitative or quantitative data )
• Who  to collect it from (i.e., the sampling strategy )
• How to  collect  it (i.e., the data collection method )
• How to  analyse  it (i.e., the data analysis methods )

Within any formal piece of academic research (be it a dissertation, thesis or journal article), you’ll find a research methodology chapter or section which covers the aspects mentioned above. Importantly, a good methodology chapter explains not just   what methodological choices were made, but also explains  why they were made. In other words, the methodology chapter should justify  the design choices, by showing that the chosen methods and techniques are the best fit for the research aims, objectives and research questions. 

So, it’s the same as research design?

Not quite. As we mentioned, research methodology refers to the collection of practical decisions regarding what data you’ll collect, from who, how you’ll collect it and how you’ll analyse it. Research design, on the other hand, is more about the overall strategy you’ll adopt in your study. For example, whether you’ll use an experimental design in which you manipulate one variable while controlling others. You can learn more about research design and the various design types here .

Need a helping hand?

What are qualitative, quantitative and mixed-methods?

Qualitative, quantitative and mixed-methods are different types of methodological approaches, distinguished by their focus on words , numbers or both . This is a bit of an oversimplification, but its a good starting point for understanding.

Let’s take a closer look.

Qualitative research refers to research which focuses on collecting and analysing words (written or spoken) and textual or visual data, whereas quantitative research focuses on measurement and testing using numerical data . Qualitative analysis can also focus on other “softer” data points, such as body language or visual elements.

It’s quite common for a qualitative methodology to be used when the research aims and research questions are exploratory  in nature. For example, a qualitative methodology might be used to understand peoples’ perceptions about an event that took place, or a political candidate running for president. 

Contrasted to this, a quantitative methodology is typically used when the research aims and research questions are confirmatory  in nature. For example, a quantitative methodology might be used to measure the relationship between two variables (e.g. personality type and likelihood to commit a crime) or to test a set of hypotheses .

As you’ve probably guessed, the mixed-method methodology attempts to combine the best of both qualitative and quantitative methodologies to integrate perspectives and create a rich picture. If you’d like to learn more about these three methodological approaches, be sure to watch our explainer video below.

What is sampling strategy?

Simply put, sampling is about deciding who (or where) you’re going to collect your data from . Why does this matter? Well, generally it’s not possible to collect data from every single person in your group of interest (this is called the “population”), so you’ll need to engage a smaller portion of that group that’s accessible and manageable (this is called the “sample”).

How you go about selecting the sample (i.e., your sampling strategy) will have a major impact on your study.  There are many different sampling methods  you can choose from, but the two overarching categories are probability   sampling and  non-probability   sampling .

Probability sampling  involves using a completely random sample from the group of people you’re interested in. This is comparable to throwing the names all potential participants into a hat, shaking it up, and picking out the “winners”. By using a completely random sample, you’ll minimise the risk of selection bias and the results of your study will be more generalisable  to the entire population. 

Non-probability sampling , on the other hand,  doesn’t use a random sample . For example, it might involve using a convenience sample, which means you’d only interview or survey people that you have access to (perhaps your friends, family or work colleagues), rather than a truly random sample. With non-probability sampling, the results are typically not generalisable .

To learn more about sampling methods, be sure to check out the video below.

What are data collection methods?

As the name suggests, data collection methods simply refers to the way in which you go about collecting the data for your study. Some of the most common data collection methods include:

• Interviews (which can be unstructured, semi-structured or structured)
• Focus groups and group interviews
• Surveys (online or physical surveys)
• Observations (watching and recording activities)
• Biophysical measurements (e.g., blood pressure, heart rate, etc.)
• Documents and records (e.g., financial reports, court records, etc.)

The choice of which data collection method to use depends on your overall research aims and research questions , as well as practicalities and resource constraints. For example, if your research is exploratory in nature, qualitative methods such as interviews and focus groups would likely be a good fit. Conversely, if your research aims to measure specific variables or test hypotheses, large-scale surveys that produce large volumes of numerical data would likely be a better fit.

What are data analysis methods?

Data analysis methods refer to the methods and techniques that you’ll use to make sense of your data. These can be grouped according to whether the research is qualitative  (words-based) or quantitative (numbers-based).

Popular data analysis methods in qualitative research include:

• Qualitative content analysis
• Thematic analysis
• Discourse analysis
• Narrative analysis
• Interpretative phenomenological analysis (IPA)
• Visual analysis (of photographs, videos, art, etc.)

Qualitative data analysis all begins with data coding , after which an analysis method is applied. In some cases, more than one analysis method is used, depending on the research aims and research questions . In the video below, we explore some  common qualitative analysis methods, along with practical examples.  

Moving on to the quantitative side of things, popular data analysis methods in this type of research include:

• Descriptive statistics (e.g. means, medians, modes )
• Inferential statistics (e.g. correlation, regression, structural equation modelling)

Again, the choice of which data collection method to use depends on your overall research aims and objectives , as well as practicalities and resource constraints. In the video below, we explain some core concepts central to quantitative analysis.

How do I choose a research methodology?

As you’ve probably picked up by now, your research aims and objectives have a major influence on the research methodology . So, the starting point for developing your research methodology is to take a step back and look at the big picture of your research, before you make methodology decisions. The first question you need to ask yourself is whether your research is exploratory or confirmatory in nature.

If your research aims and objectives are primarily exploratory in nature, your research will likely be qualitative and therefore you might consider qualitative data collection methods (e.g. interviews) and analysis methods (e.g. qualitative content analysis). 

Conversely, if your research aims and objective are looking to measure or test something (i.e. they’re confirmatory), then your research will quite likely be quantitative in nature, and you might consider quantitative data collection methods (e.g. surveys) and analyses (e.g. statistical analysis).

Designing your research and working out your methodology is a large topic, which we cover extensively on the blog . For now, however, the key takeaway is that you should always start with your research aims, objectives and research questions (the golden thread). Every methodological choice you make needs align with those three components. 

Example of a research methodology chapter

In the video below, we provide a detailed walkthrough of a research methodology from an actual dissertation, as well as an overview of our free methodology template .

Psst... there’s more!

This post was based on one of our popular Research Bootcamps . If you're working on a research project, you'll definitely want to check this out ...

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199 Comments

Thank you for this simple yet comprehensive and easy to digest presentation. God Bless!

You’re most welcome, Leo. Best of luck with your research!

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Thanks for your comment.

We can’t write your methodology for you. If you’re looking for samples, you should be able to find some sample methodologies on Google. Alternatively, you can download some previous dissertations from a dissertation directory and have a look at the methodology chapters therein.

All the best with your research.

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Great to hear that, Ngwisa. Good luck with your research methodology!

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I was given an assignment to research 2 publications and describe their research methodology? I don’t know how to start this task can someone help me?

Sure. You’re welcome to book an initial consultation with one of our Research Coaches to discuss how we can assist – https://gradcoach.com/book/new/ .

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I am a bit confused about research design and methodology. Are they the same? If not, what are the differences and how are they related?

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Am a new researcher trying to learn how best to write a research proposal. I find your article spot on and want to download the free template but finding difficulties. Can u kindly send it to my email, the free download entitled, “Free Download: Research Proposal Template (with Examples)”.

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how do i reference this?

MLA Jansen, Derek, and Kerryn Warren. “What (Exactly) Is Research Methodology?” Grad Coach, June 2021, gradcoach.com/what-is-research-methodology/.

APA Jansen, D., & Warren, K. (2021, June). What (Exactly) Is Research Methodology? Grad Coach. https://gradcoach.com/what-is-research-methodology/

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What is research methodology?

The basics of research methodology

Why do you need a research methodology, what needs to be included, why do you need to document your research method, what are the different types of research instruments, qualitative / quantitative / mixed research methodologies, how do you choose the best research methodology for you, frequently asked questions about research methodology, related articles.

When you’re working on your first piece of academic research, there are many different things to focus on, and it can be overwhelming to stay on top of everything. This is especially true of budding or inexperienced researchers.

If you’ve never put together a research proposal before or find yourself in a position where you need to explain your research methodology decisions, there are a few things you need to be aware of.

Once you understand the ins and outs, handling academic research in the future will be less intimidating. We break down the basics below:

A research methodology encompasses the way in which you intend to carry out your research. This includes how you plan to tackle things like collection methods, statistical analysis, participant observations, and more.

You can think of your research methodology as being a formula. One part will be how you plan on putting your research into practice, and another will be why you feel this is the best way to approach it. Your research methodology is ultimately a methodological and systematic plan to resolve your research problem.

In short, you are explaining how you will take your idea and turn it into a study, which in turn will produce valid and reliable results that are in accordance with the aims and objectives of your research. This is true whether your paper plans to make use of qualitative methods or quantitative methods.

The purpose of a research methodology is to explain the reasoning behind your approach to your research - you'll need to support your collection methods, methods of analysis, and other key points of your work.

Think of it like writing a plan or an outline for you what you intend to do.

When carrying out research, it can be easy to go off-track or depart from your standard methodology.

Tip: Having a methodology keeps you accountable and on track with your original aims and objectives, and gives you a suitable and sound plan to keep your project manageable, smooth, and effective.

With all that said, how do you write out your standard approach to a research methodology?

As a general plan, your methodology should include the following information:

• Your research method.  You need to state whether you plan to use quantitative analysis, qualitative analysis, or mixed-method research methods. This will often be determined by what you hope to achieve with your research.
• Explain your reasoning. Why are you taking this methodological approach? Why is this particular methodology the best way to answer your research problem and achieve your objectives?
• Explain your instruments.  This will mainly be about your collection methods. There are varying instruments to use such as interviews, physical surveys, questionnaires, for example. Your methodology will need to detail your reasoning in choosing a particular instrument for your research.
• What will you do with your results?  How are you going to analyze the data once you have gathered it?
• Advise your reader.  If there is anything in your research methodology that your reader might be unfamiliar with, you should explain it in more detail. For example, you should give any background information to your methods that might be relevant or provide your reasoning if you are conducting your research in a non-standard way.
• How will your sampling process go?  What will your sampling procedure be and why? For example, if you will collect data by carrying out semi-structured or unstructured interviews, how will you choose your interviewees and how will you conduct the interviews themselves?
• Any practical limitations?  You should discuss any limitations you foresee being an issue when you’re carrying out your research.

In any dissertation, thesis, or academic journal, you will always find a chapter dedicated to explaining the research methodology of the person who carried out the study, also referred to as the methodology section of the work.

A good research methodology will explain what you are going to do and why, while a poor methodology will lead to a messy or disorganized approach.

You should also be able to justify in this section your reasoning for why you intend to carry out your research in a particular way, especially if it might be a particularly unique method.

Having a sound methodology in place can also help you with the following:

• When another researcher at a later date wishes to try and replicate your research, they will need your explanations and guidelines.
• In the event that you receive any criticism or questioning on the research you carried out at a later point, you will be able to refer back to it and succinctly explain the how and why of your approach.
• It provides you with a plan to follow throughout your research. When you are drafting your methodology approach, you need to be sure that the method you are using is the right one for your goal. This will help you with both explaining and understanding your method.
• It affords you the opportunity to document from the outset what you intend to achieve with your research, from start to finish.

A research instrument is a tool you will use to help you collect, measure and analyze the data you use as part of your research.

The choice of research instrument will usually be yours to make as the researcher and will be whichever best suits your methodology.

There are many different research instruments you can use in collecting data for your research.

Generally, they can be grouped as follows:

• Interviews (either as a group or one-on-one). You can carry out interviews in many different ways. For example, your interview can be structured, semi-structured, or unstructured. The difference between them is how formal the set of questions is that is asked of the interviewee. In a group interview, you may choose to ask the interviewees to give you their opinions or perceptions on certain topics.
• Surveys (online or in-person). In survey research, you are posing questions in which you ask for a response from the person taking the survey. You may wish to have either free-answer questions such as essay-style questions, or you may wish to use closed questions such as multiple choice. You may even wish to make the survey a mixture of both.
• Focus Groups.  Similar to the group interview above, you may wish to ask a focus group to discuss a particular topic or opinion while you make a note of the answers given.
• Observations.  This is a good research instrument to use if you are looking into human behaviors. Different ways of researching this include studying the spontaneous behavior of participants in their everyday life, or something more structured. A structured observation is research conducted at a set time and place where researchers observe behavior as planned and agreed upon with participants.

These are the most common ways of carrying out research, but it is really dependent on your needs as a researcher and what approach you think is best to take.

It is also possible to combine a number of research instruments if this is necessary and appropriate in answering your research problem.

There are three different types of methodologies, and they are distinguished by whether they focus on words, numbers, or both.

➡️ Want to learn more about the differences between qualitative and quantitative research, and how to use both methods? Check out our guide for that!

If you've done your due diligence, you'll have an idea of which methodology approach is best suited to your research.

It’s likely that you will have carried out considerable reading and homework before you reach this point and you may have taken inspiration from other similar studies that have yielded good results.

Still, it is important to consider different options before setting your research in stone. Exploring different options available will help you to explain why the choice you ultimately make is preferable to other methods.

If proving your research problem requires you to gather large volumes of numerical data to test hypotheses, a quantitative research method is likely to provide you with the most usable results.

If instead you’re looking to try and learn more about people, and their perception of events, your methodology is more exploratory in nature and would therefore probably be better served using a qualitative research methodology.

It helps to always bring things back to the question: what do I want to achieve with my research?

Once you have conducted your research, you need to analyze it. Here are some helpful guides for qualitative data analysis:

➡️  How to do a content analysis

➡️  How to do a thematic analysis

➡️  How to do a rhetorical analysis

Research methodology refers to the techniques used to find and analyze information for a study, ensuring that the results are valid, reliable and that they address the research objective.

Data can typically be organized into four different categories or methods: observational, experimental, simulation, and derived.

Writing a methodology section is a process of introducing your methods and instruments, discussing your analysis, providing more background information, addressing your research limitations, and more.

Your research methodology section will need a clear research question and proposed research approach. You'll need to add a background, introduce your research question, write your methodology and add the works you cited during your data collecting phase.

The research methodology section of your study will indicate how valid your findings are and how well-informed your paper is. It also assists future researchers planning to use the same methodology, who want to cite your study or replicate it.

Research Methodology: An Introduction

• First Online: 31 March 2018

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Digital age brings the most dramatic changes in this study and research discipline as well as in other fields of human activities. Scientific research is known for a very long time, however in comparison with other research fields the business and management researches are a little bit younger. The information technologies and new research methodologies that have recently emerged, dramatically change the nature of the research. Therefore, researchers should be ready to absorb new possibilities and follow basic roles coming from earlier stages of the discipline. The intention of this chapter is to provide a brief introduction to those aspects of pertinent research to beginner researchers. The chapter presents the nature of scientific research so that it may be clearly understood and uses, as its basic approach, the fundamental principles of problem solving. The scope of the research provides an overviews the entire assumptions about reality, knowledge and human nature, key terms of theory and research presented. Main concepts of the research are discussed and all this is oriented to business, management and economic science specific.

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Davidavičienė, V. (2018). Research Methodology: An Introduction. In: Marx Gómez, J., Mouselli, S. (eds) Modernizing the Academic Teaching and Research Environment. Progress in IS. Springer, Cham. https://doi.org/10.1007/978-3-319-74173-4_1

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The method section of a report details how the research was conducted, the research methods used and the reasons for choosing those methods. It should outline:

• the participants and research methods used, e.g. surveys/questionnaire, interviews
• refer to other relevant studies.

The methodology is a step-by-step explanation of the research process. It should be factual and is mainly written in the past tense.

Sample Methodology

The research used a quantitative methodology based on the approach advocated by Williams (2009). This study was conducted by questionnaire and investigated university teaching staff attitudes to the use of mobile phones in tutorials (see Appendix 1). The questionnaire used Likert scales to assess social attitudes (Jones 2007) to student mobile phone use and provided open-ended responses for additional comments. The survey was voluntary and anonymous. A total of 412 questionnaires were distributed online to randomly selected staff from each of the three colleges within the university. The completed questionnaires were returned by email.

• 'Describe' is short for: describing how the research was done.
• 'Refers' is short for: refers to relevant reading/literature.

[Describe: The research used a quantitative methodology based on the approach advocated by Williams (2009).] [Refer: This study was conducted by questionnaire and investigated university teaching staff attitudes to the use of mobile phones in tutorials (see Appendix 1). The questionnaire used Likert scales to assess social attitudes (Jones 2007) to student mobile phone use and provided open-ended responses for additional comments.] [Describes: The survey was voluntary and anonymous. A total of 412 questionnaires were distributed online to randomly selected staff from each of the three colleges within the university. The completed questionnaires were returned by email.]

• Overall structure of a report
• Example of a report
• Report checklist
• Writing a business research report

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• Published: 07 September 2020

A tutorial on methodological studies: the what, when, how and why

• Lawrence Mbuagbaw   ORCID: orcid.org/0000-0001-5855-5461 1 , 2 , 3 ,
• Daeria O. Lawson 1 ,
• Livia Puljak 4 ,
• David B. Allison 5 &
• Lehana Thabane 1 , 2 , 6 , 7 , 8  

BMC Medical Research Methodology volume  20 , Article number:  226 ( 2020 ) Cite this article

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Methodological studies – studies that evaluate the design, analysis or reporting of other research-related reports – play an important role in health research. They help to highlight issues in the conduct of research with the aim of improving health research methodology, and ultimately reducing research waste.

We provide an overview of some of the key aspects of methodological studies such as what they are, and when, how and why they are done. We adopt a “frequently asked questions” format to facilitate reading this paper and provide multiple examples to help guide researchers interested in conducting methodological studies. Some of the topics addressed include: is it necessary to publish a study protocol? How to select relevant research reports and databases for a methodological study? What approaches to data extraction and statistical analysis should be considered when conducting a methodological study? What are potential threats to validity and is there a way to appraise the quality of methodological studies?

Appropriate reflection and application of basic principles of epidemiology and biostatistics are required in the design and analysis of methodological studies. This paper provides an introduction for further discussion about the conduct of methodological studies.

Peer Review reports

The field of meta-research (or research-on-research) has proliferated in recent years in response to issues with research quality and conduct [ 1 , 2 , 3 ]. As the name suggests, this field targets issues with research design, conduct, analysis and reporting. Various types of research reports are often examined as the unit of analysis in these studies (e.g. abstracts, full manuscripts, trial registry entries). Like many other novel fields of research, meta-research has seen a proliferation of use before the development of reporting guidance. For example, this was the case with randomized trials for which risk of bias tools and reporting guidelines were only developed much later – after many trials had been published and noted to have limitations [ 4 , 5 ]; and for systematic reviews as well [ 6 , 7 , 8 ]. However, in the absence of formal guidance, studies that report on research differ substantially in how they are named, conducted and reported [ 9 , 10 ]. This creates challenges in identifying, summarizing and comparing them. In this tutorial paper, we will use the term methodological study to refer to any study that reports on the design, conduct, analysis or reporting of primary or secondary research-related reports (such as trial registry entries and conference abstracts).

In the past 10 years, there has been an increase in the use of terms related to methodological studies (based on records retrieved with a keyword search [in the title and abstract] for “methodological review” and “meta-epidemiological study” in PubMed up to December 2019), suggesting that these studies may be appearing more frequently in the literature. See Fig.  1 .

Trends in the number studies that mention “methodological review” or “meta-

epidemiological study” in PubMed.

The methods used in many methodological studies have been borrowed from systematic and scoping reviews. This practice has influenced the direction of the field, with many methodological studies including searches of electronic databases, screening of records, duplicate data extraction and assessments of risk of bias in the included studies. However, the research questions posed in methodological studies do not always require the approaches listed above, and guidance is needed on when and how to apply these methods to a methodological study. Even though methodological studies can be conducted on qualitative or mixed methods research, this paper focuses on and draws examples exclusively from quantitative research.

The objectives of this paper are to provide some insights on how to conduct methodological studies so that there is greater consistency between the research questions posed, and the design, analysis and reporting of findings. We provide multiple examples to illustrate concepts and a proposed framework for categorizing methodological studies in quantitative research.

What is a methodological study?

Any study that describes or analyzes methods (design, conduct, analysis or reporting) in published (or unpublished) literature is a methodological study. Consequently, the scope of methodological studies is quite extensive and includes, but is not limited to, topics as diverse as: research question formulation [ 11 ]; adherence to reporting guidelines [ 12 , 13 , 14 ] and consistency in reporting [ 15 ]; approaches to study analysis [ 16 ]; investigating the credibility of analyses [ 17 ]; and studies that synthesize these methodological studies [ 18 ]. While the nomenclature of methodological studies is not uniform, the intents and purposes of these studies remain fairly consistent – to describe or analyze methods in primary or secondary studies. As such, methodological studies may also be classified as a subtype of observational studies.

Parallel to this are experimental studies that compare different methods. Even though they play an important role in informing optimal research methods, experimental methodological studies are beyond the scope of this paper. Examples of such studies include the randomized trials by Buscemi et al., comparing single data extraction to double data extraction [ 19 ], and Carrasco-Labra et al., comparing approaches to presenting findings in Grading of Recommendations, Assessment, Development and Evaluations (GRADE) summary of findings tables [ 20 ]. In these studies, the unit of analysis is the person or groups of individuals applying the methods. We also direct readers to the Studies Within a Trial (SWAT) and Studies Within a Review (SWAR) programme operated through the Hub for Trials Methodology Research, for further reading as a potential useful resource for these types of experimental studies [ 21 ]. Lastly, this paper is not meant to inform the conduct of research using computational simulation and mathematical modeling for which some guidance already exists [ 22 ], or studies on the development of methods using consensus-based approaches.

When should we conduct a methodological study?

Methodological studies occupy a unique niche in health research that allows them to inform methodological advances. Methodological studies should also be conducted as pre-cursors to reporting guideline development, as they provide an opportunity to understand current practices, and help to identify the need for guidance and gaps in methodological or reporting quality. For example, the development of the popular Preferred Reporting Items of Systematic reviews and Meta-Analyses (PRISMA) guidelines were preceded by methodological studies identifying poor reporting practices [ 23 , 24 ]. In these instances, after the reporting guidelines are published, methodological studies can also be used to monitor uptake of the guidelines.

These studies can also be conducted to inform the state of the art for design, analysis and reporting practices across different types of health research fields, with the aim of improving research practices, and preventing or reducing research waste. For example, Samaan et al. conducted a scoping review of adherence to different reporting guidelines in health care literature [ 18 ]. Methodological studies can also be used to determine the factors associated with reporting practices. For example, Abbade et al. investigated journal characteristics associated with the use of the Participants, Intervention, Comparison, Outcome, Timeframe (PICOT) format in framing research questions in trials of venous ulcer disease [ 11 ].

How often are methodological studies conducted?

There is no clear answer to this question. Based on a search of PubMed, the use of related terms (“methodological review” and “meta-epidemiological study”) – and therefore, the number of methodological studies – is on the rise. However, many other terms are used to describe methodological studies. There are also many studies that explore design, conduct, analysis or reporting of research reports, but that do not use any specific terms to describe or label their study design in terms of “methodology”. This diversity in nomenclature makes a census of methodological studies elusive. Appropriate terminology and key words for methodological studies are needed to facilitate improved accessibility for end-users.

Why do we conduct methodological studies?

Methodological studies provide information on the design, conduct, analysis or reporting of primary and secondary research and can be used to appraise quality, quantity, completeness, accuracy and consistency of health research. These issues can be explored in specific fields, journals, databases, geographical regions and time periods. For example, Areia et al. explored the quality of reporting of endoscopic diagnostic studies in gastroenterology [ 25 ]; Knol et al. investigated the reporting of p -values in baseline tables in randomized trial published in high impact journals [ 26 ]; Chen et al. describe adherence to the Consolidated Standards of Reporting Trials (CONSORT) statement in Chinese Journals [ 27 ]; and Hopewell et al. describe the effect of editors’ implementation of CONSORT guidelines on reporting of abstracts over time [ 28 ]. Methodological studies provide useful information to researchers, clinicians, editors, publishers and users of health literature. As a result, these studies have been at the cornerstone of important methodological developments in the past two decades and have informed the development of many health research guidelines including the highly cited CONSORT statement [ 5 ].

Where can we find methodological studies?

Methodological studies can be found in most common biomedical bibliographic databases (e.g. Embase, MEDLINE, PubMed, Web of Science). However, the biggest caveat is that methodological studies are hard to identify in the literature due to the wide variety of names used and the lack of comprehensive databases dedicated to them. A handful can be found in the Cochrane Library as “Cochrane Methodology Reviews”, but these studies only cover methodological issues related to systematic reviews. Previous attempts to catalogue all empirical studies of methods used in reviews were abandoned 10 years ago [ 29 ]. In other databases, a variety of search terms may be applied with different levels of sensitivity and specificity.

Some frequently asked questions about methodological studies

In this section, we have outlined responses to questions that might help inform the conduct of methodological studies.

Q: How should I select research reports for my methodological study?

A: Selection of research reports for a methodological study depends on the research question and eligibility criteria. Once a clear research question is set and the nature of literature one desires to review is known, one can then begin the selection process. Selection may begin with a broad search, especially if the eligibility criteria are not apparent. For example, a methodological study of Cochrane Reviews of HIV would not require a complex search as all eligible studies can easily be retrieved from the Cochrane Library after checking a few boxes [ 30 ]. On the other hand, a methodological study of subgroup analyses in trials of gastrointestinal oncology would require a search to find such trials, and further screening to identify trials that conducted a subgroup analysis [ 31 ].

The strategies used for identifying participants in observational studies can apply here. One may use a systematic search to identify all eligible studies. If the number of eligible studies is unmanageable, a random sample of articles can be expected to provide comparable results if it is sufficiently large [ 32 ]. For example, Wilson et al. used a random sample of trials from the Cochrane Stroke Group’s Trial Register to investigate completeness of reporting [ 33 ]. It is possible that a simple random sample would lead to underrepresentation of units (i.e. research reports) that are smaller in number. This is relevant if the investigators wish to compare multiple groups but have too few units in one group. In this case a stratified sample would help to create equal groups. For example, in a methodological study comparing Cochrane and non-Cochrane reviews, Kahale et al. drew random samples from both groups [ 34 ]. Alternatively, systematic or purposeful sampling strategies can be used and we encourage researchers to justify their selected approaches based on the study objective.

Q: How many databases should I search?

A: The number of databases one should search would depend on the approach to sampling, which can include targeting the entire “population” of interest or a sample of that population. If you are interested in including the entire target population for your research question, or drawing a random or systematic sample from it, then a comprehensive and exhaustive search for relevant articles is required. In this case, we recommend using systematic approaches for searching electronic databases (i.e. at least 2 databases with a replicable and time stamped search strategy). The results of your search will constitute a sampling frame from which eligible studies can be drawn.

Alternatively, if your approach to sampling is purposeful, then we recommend targeting the database(s) or data sources (e.g. journals, registries) that include the information you need. For example, if you are conducting a methodological study of high impact journals in plastic surgery and they are all indexed in PubMed, you likely do not need to search any other databases. You may also have a comprehensive list of all journals of interest and can approach your search using the journal names in your database search (or by accessing the journal archives directly from the journal’s website). Even though one could also search journals’ web pages directly, using a database such as PubMed has multiple advantages, such as the use of filters, so the search can be narrowed down to a certain period, or study types of interest. Furthermore, individual journals’ web sites may have different search functionalities, which do not necessarily yield a consistent output.

Q: Should I publish a protocol for my methodological study?

A: A protocol is a description of intended research methods. Currently, only protocols for clinical trials require registration [ 35 ]. Protocols for systematic reviews are encouraged but no formal recommendation exists. The scientific community welcomes the publication of protocols because they help protect against selective outcome reporting, the use of post hoc methodologies to embellish results, and to help avoid duplication of efforts [ 36 ]. While the latter two risks exist in methodological research, the negative consequences may be substantially less than for clinical outcomes. In a sample of 31 methodological studies, 7 (22.6%) referenced a published protocol [ 9 ]. In the Cochrane Library, there are 15 protocols for methodological reviews (21 July 2020). This suggests that publishing protocols for methodological studies is not uncommon.

Authors can consider publishing their study protocol in a scholarly journal as a manuscript. Advantages of such publication include obtaining peer-review feedback about the planned study, and easy retrieval by searching databases such as PubMed. The disadvantages in trying to publish protocols includes delays associated with manuscript handling and peer review, as well as costs, as few journals publish study protocols, and those journals mostly charge article-processing fees [ 37 ]. Authors who would like to make their protocol publicly available without publishing it in scholarly journals, could deposit their study protocols in publicly available repositories, such as the Open Science Framework ( https://osf.io/ ).

Q: How to appraise the quality of a methodological study?

A: To date, there is no published tool for appraising the risk of bias in a methodological study, but in principle, a methodological study could be considered as a type of observational study. Therefore, during conduct or appraisal, care should be taken to avoid the biases common in observational studies [ 38 ]. These biases include selection bias, comparability of groups, and ascertainment of exposure or outcome. In other words, to generate a representative sample, a comprehensive reproducible search may be necessary to build a sampling frame. Additionally, random sampling may be necessary to ensure that all the included research reports have the same probability of being selected, and the screening and selection processes should be transparent and reproducible. To ensure that the groups compared are similar in all characteristics, matching, random sampling or stratified sampling can be used. Statistical adjustments for between-group differences can also be applied at the analysis stage. Finally, duplicate data extraction can reduce errors in assessment of exposures or outcomes.

Q: Should I justify a sample size?

A: In all instances where one is not using the target population (i.e. the group to which inferences from the research report are directed) [ 39 ], a sample size justification is good practice. The sample size justification may take the form of a description of what is expected to be achieved with the number of articles selected, or a formal sample size estimation that outlines the number of articles required to answer the research question with a certain precision and power. Sample size justifications in methodological studies are reasonable in the following instances:

Comparing two groups

Determining a proportion, mean or another quantifier

Determining factors associated with an outcome using regression-based analyses

For example, El Dib et al. computed a sample size requirement for a methodological study of diagnostic strategies in randomized trials, based on a confidence interval approach [ 40 ].

Q: What should I call my study?

A: Other terms which have been used to describe/label methodological studies include “ methodological review ”, “methodological survey” , “meta-epidemiological study” , “systematic review” , “systematic survey”, “meta-research”, “research-on-research” and many others. We recommend that the study nomenclature be clear, unambiguous, informative and allow for appropriate indexing. Methodological study nomenclature that should be avoided includes “ systematic review” – as this will likely be confused with a systematic review of a clinical question. “ Systematic survey” may also lead to confusion about whether the survey was systematic (i.e. using a preplanned methodology) or a survey using “ systematic” sampling (i.e. a sampling approach using specific intervals to determine who is selected) [ 32 ]. Any of the above meanings of the words “ systematic” may be true for methodological studies and could be potentially misleading. “ Meta-epidemiological study” is ideal for indexing, but not very informative as it describes an entire field. The term “ review ” may point towards an appraisal or “review” of the design, conduct, analysis or reporting (or methodological components) of the targeted research reports, yet it has also been used to describe narrative reviews [ 41 , 42 ]. The term “ survey ” is also in line with the approaches used in many methodological studies [ 9 ], and would be indicative of the sampling procedures of this study design. However, in the absence of guidelines on nomenclature, the term “ methodological study ” is broad enough to capture most of the scenarios of such studies.

Q: Should I account for clustering in my methodological study?

A: Data from methodological studies are often clustered. For example, articles coming from a specific source may have different reporting standards (e.g. the Cochrane Library). Articles within the same journal may be similar due to editorial practices and policies, reporting requirements and endorsement of guidelines. There is emerging evidence that these are real concerns that should be accounted for in analyses [ 43 ]. Some cluster variables are described in the section: “ What variables are relevant to methodological studies?”

A variety of modelling approaches can be used to account for correlated data, including the use of marginal, fixed or mixed effects regression models with appropriate computation of standard errors [ 44 ]. For example, Kosa et al. used generalized estimation equations to account for correlation of articles within journals [ 15 ]. Not accounting for clustering could lead to incorrect p -values, unduly narrow confidence intervals, and biased estimates [ 45 ].

Q: Should I extract data in duplicate?

A: Yes. Duplicate data extraction takes more time but results in less errors [ 19 ]. Data extraction errors in turn affect the effect estimate [ 46 ], and therefore should be mitigated. Duplicate data extraction should be considered in the absence of other approaches to minimize extraction errors. However, much like systematic reviews, this area will likely see rapid new advances with machine learning and natural language processing technologies to support researchers with screening and data extraction [ 47 , 48 ]. However, experience plays an important role in the quality of extracted data and inexperienced extractors should be paired with experienced extractors [ 46 , 49 ].

Q: Should I assess the risk of bias of research reports included in my methodological study?

A : Risk of bias is most useful in determining the certainty that can be placed in the effect measure from a study. In methodological studies, risk of bias may not serve the purpose of determining the trustworthiness of results, as effect measures are often not the primary goal of methodological studies. Determining risk of bias in methodological studies is likely a practice borrowed from systematic review methodology, but whose intrinsic value is not obvious in methodological studies. When it is part of the research question, investigators often focus on one aspect of risk of bias. For example, Speich investigated how blinding was reported in surgical trials [ 50 ], and Abraha et al., investigated the application of intention-to-treat analyses in systematic reviews and trials [ 51 ].

Q: What variables are relevant to methodological studies?

A: There is empirical evidence that certain variables may inform the findings in a methodological study. We outline some of these and provide a brief overview below:

Country: Countries and regions differ in their research cultures, and the resources available to conduct research. Therefore, it is reasonable to believe that there may be differences in methodological features across countries. Methodological studies have reported loco-regional differences in reporting quality [ 52 , 53 ]. This may also be related to challenges non-English speakers face in publishing papers in English.

Authors’ expertise: The inclusion of authors with expertise in research methodology, biostatistics, and scientific writing is likely to influence the end-product. Oltean et al. found that among randomized trials in orthopaedic surgery, the use of analyses that accounted for clustering was more likely when specialists (e.g. statistician, epidemiologist or clinical trials methodologist) were included on the study team [ 54 ]. Fleming et al. found that including methodologists in the review team was associated with appropriate use of reporting guidelines [ 55 ].

Source of funding and conflicts of interest: Some studies have found that funded studies report better [ 56 , 57 ], while others do not [ 53 , 58 ]. The presence of funding would indicate the availability of resources deployed to ensure optimal design, conduct, analysis and reporting. However, the source of funding may introduce conflicts of interest and warrant assessment. For example, Kaiser et al. investigated the effect of industry funding on obesity or nutrition randomized trials and found that reporting quality was similar [ 59 ]. Thomas et al. looked at reporting quality of long-term weight loss trials and found that industry funded studies were better [ 60 ]. Kan et al. examined the association between industry funding and “positive trials” (trials reporting a significant intervention effect) and found that industry funding was highly predictive of a positive trial [ 61 ]. This finding is similar to that of a recent Cochrane Methodology Review by Hansen et al. [ 62 ]

Journal characteristics: Certain journals’ characteristics may influence the study design, analysis or reporting. Characteristics such as journal endorsement of guidelines [ 63 , 64 ], and Journal Impact Factor (JIF) have been shown to be associated with reporting [ 63 , 65 , 66 , 67 ].

Study size (sample size/number of sites): Some studies have shown that reporting is better in larger studies [ 53 , 56 , 58 ].

Year of publication: It is reasonable to assume that design, conduct, analysis and reporting of research will change over time. Many studies have demonstrated improvements in reporting over time or after the publication of reporting guidelines [ 68 , 69 ].

Type of intervention: In a methodological study of reporting quality of weight loss intervention studies, Thabane et al. found that trials of pharmacologic interventions were reported better than trials of non-pharmacologic interventions [ 70 ].

Interactions between variables: Complex interactions between the previously listed variables are possible. High income countries with more resources may be more likely to conduct larger studies and incorporate a variety of experts. Authors in certain countries may prefer certain journals, and journal endorsement of guidelines and editorial policies may change over time.

Q: Should I focus only on high impact journals?

A: Investigators may choose to investigate only high impact journals because they are more likely to influence practice and policy, or because they assume that methodological standards would be higher. However, the JIF may severely limit the scope of articles included and may skew the sample towards articles with positive findings. The generalizability and applicability of findings from a handful of journals must be examined carefully, especially since the JIF varies over time. Even among journals that are all “high impact”, variations exist in methodological standards.

Q: Can I conduct a methodological study of qualitative research?

A: Yes. Even though a lot of methodological research has been conducted in the quantitative research field, methodological studies of qualitative studies are feasible. Certain databases that catalogue qualitative research including the Cumulative Index to Nursing & Allied Health Literature (CINAHL) have defined subject headings that are specific to methodological research (e.g. “research methodology”). Alternatively, one could also conduct a qualitative methodological review; that is, use qualitative approaches to synthesize methodological issues in qualitative studies.

Q: What reporting guidelines should I use for my methodological study?

A: There is no guideline that covers the entire scope of methodological studies. One adaptation of the PRISMA guidelines has been published, which works well for studies that aim to use the entire target population of research reports [ 71 ]. However, it is not widely used (40 citations in 2 years as of 09 December 2019), and methodological studies that are designed as cross-sectional or before-after studies require a more fit-for purpose guideline. A more encompassing reporting guideline for a broad range of methodological studies is currently under development [ 72 ]. However, in the absence of formal guidance, the requirements for scientific reporting should be respected, and authors of methodological studies should focus on transparency and reproducibility.

Q: What are the potential threats to validity and how can I avoid them?

A: Methodological studies may be compromised by a lack of internal or external validity. The main threats to internal validity in methodological studies are selection and confounding bias. Investigators must ensure that the methods used to select articles does not make them differ systematically from the set of articles to which they would like to make inferences. For example, attempting to make extrapolations to all journals after analyzing high-impact journals would be misleading.

Many factors (confounders) may distort the association between the exposure and outcome if the included research reports differ with respect to these factors [ 73 ]. For example, when examining the association between source of funding and completeness of reporting, it may be necessary to account for journals that endorse the guidelines. Confounding bias can be addressed by restriction, matching and statistical adjustment [ 73 ]. Restriction appears to be the method of choice for many investigators who choose to include only high impact journals or articles in a specific field. For example, Knol et al. examined the reporting of p -values in baseline tables of high impact journals [ 26 ]. Matching is also sometimes used. In the methodological study of non-randomized interventional studies of elective ventral hernia repair, Parker et al. matched prospective studies with retrospective studies and compared reporting standards [ 74 ]. Some other methodological studies use statistical adjustments. For example, Zhang et al. used regression techniques to determine the factors associated with missing participant data in trials [ 16 ].

With regard to external validity, researchers interested in conducting methodological studies must consider how generalizable or applicable their findings are. This should tie in closely with the research question and should be explicit. For example. Findings from methodological studies on trials published in high impact cardiology journals cannot be assumed to be applicable to trials in other fields. However, investigators must ensure that their sample truly represents the target sample either by a) conducting a comprehensive and exhaustive search, or b) using an appropriate and justified, randomly selected sample of research reports.

Even applicability to high impact journals may vary based on the investigators’ definition, and over time. For example, for high impact journals in the field of general medicine, Bouwmeester et al. included the Annals of Internal Medicine (AIM), BMJ, the Journal of the American Medical Association (JAMA), Lancet, the New England Journal of Medicine (NEJM), and PLoS Medicine ( n  = 6) [ 75 ]. In contrast, the high impact journals selected in the methodological study by Schiller et al. were BMJ, JAMA, Lancet, and NEJM ( n  = 4) [ 76 ]. Another methodological study by Kosa et al. included AIM, BMJ, JAMA, Lancet and NEJM ( n  = 5). In the methodological study by Thabut et al., journals with a JIF greater than 5 were considered to be high impact. Riado Minguez et al. used first quartile journals in the Journal Citation Reports (JCR) for a specific year to determine “high impact” [ 77 ]. Ultimately, the definition of high impact will be based on the number of journals the investigators are willing to include, the year of impact and the JIF cut-off [ 78 ]. We acknowledge that the term “generalizability” may apply differently for methodological studies, especially when in many instances it is possible to include the entire target population in the sample studied.

Finally, methodological studies are not exempt from information bias which may stem from discrepancies in the included research reports [ 79 ], errors in data extraction, or inappropriate interpretation of the information extracted. Likewise, publication bias may also be a concern in methodological studies, but such concepts have not yet been explored.

A proposed framework

In order to inform discussions about methodological studies, the development of guidance for what should be reported, we have outlined some key features of methodological studies that can be used to classify them. For each of the categories outlined below, we provide an example. In our experience, the choice of approach to completing a methodological study can be informed by asking the following four questions:

What is the aim?

Methodological studies that investigate bias

A methodological study may be focused on exploring sources of bias in primary or secondary studies (meta-bias), or how bias is analyzed. We have taken care to distinguish bias (i.e. systematic deviations from the truth irrespective of the source) from reporting quality or completeness (i.e. not adhering to a specific reporting guideline or norm). An example of where this distinction would be important is in the case of a randomized trial with no blinding. This study (depending on the nature of the intervention) would be at risk of performance bias. However, if the authors report that their study was not blinded, they would have reported adequately. In fact, some methodological studies attempt to capture both “quality of conduct” and “quality of reporting”, such as Richie et al., who reported on the risk of bias in randomized trials of pharmacy practice interventions [ 80 ]. Babic et al. investigated how risk of bias was used to inform sensitivity analyses in Cochrane reviews [ 81 ]. Further, biases related to choice of outcomes can also be explored. For example, Tan et al investigated differences in treatment effect size based on the outcome reported [ 82 ].

Methodological studies that investigate quality (or completeness) of reporting

Methodological studies may report quality of reporting against a reporting checklist (i.e. adherence to guidelines) or against expected norms. For example, Croituro et al. report on the quality of reporting in systematic reviews published in dermatology journals based on their adherence to the PRISMA statement [ 83 ], and Khan et al. described the quality of reporting of harms in randomized controlled trials published in high impact cardiovascular journals based on the CONSORT extension for harms [ 84 ]. Other methodological studies investigate reporting of certain features of interest that may not be part of formally published checklists or guidelines. For example, Mbuagbaw et al. described how often the implications for research are elaborated using the Evidence, Participants, Intervention, Comparison, Outcome, Timeframe (EPICOT) format [ 30 ].

Methodological studies that investigate the consistency of reporting

Sometimes investigators may be interested in how consistent reports of the same research are, as it is expected that there should be consistency between: conference abstracts and published manuscripts; manuscript abstracts and manuscript main text; and trial registration and published manuscript. For example, Rosmarakis et al. investigated consistency between conference abstracts and full text manuscripts [ 85 ].

Methodological studies that investigate factors associated with reporting

In addition to identifying issues with reporting in primary and secondary studies, authors of methodological studies may be interested in determining the factors that are associated with certain reporting practices. Many methodological studies incorporate this, albeit as a secondary outcome. For example, Farrokhyar et al. investigated the factors associated with reporting quality in randomized trials of coronary artery bypass grafting surgery [ 53 ].

Methodological studies that investigate methods

Methodological studies may also be used to describe methods or compare methods, and the factors associated with methods. Muller et al. described the methods used for systematic reviews and meta-analyses of observational studies [ 86 ].

Methodological studies that summarize other methodological studies

Some methodological studies synthesize results from other methodological studies. For example, Li et al. conducted a scoping review of methodological reviews that investigated consistency between full text and abstracts in primary biomedical research [ 87 ].

Methodological studies that investigate nomenclature and terminology

Some methodological studies may investigate the use of names and terms in health research. For example, Martinic et al. investigated the definitions of systematic reviews used in overviews of systematic reviews (OSRs), meta-epidemiological studies and epidemiology textbooks [ 88 ].

Other types of methodological studies

In addition to the previously mentioned experimental methodological studies, there may exist other types of methodological studies not captured here.

What is the design?

Methodological studies that are descriptive

Most methodological studies are purely descriptive and report their findings as counts (percent) and means (standard deviation) or medians (interquartile range). For example, Mbuagbaw et al. described the reporting of research recommendations in Cochrane HIV systematic reviews [ 30 ]. Gohari et al. described the quality of reporting of randomized trials in diabetes in Iran [ 12 ].

Methodological studies that are analytical

Some methodological studies are analytical wherein “analytical studies identify and quantify associations, test hypotheses, identify causes and determine whether an association exists between variables, such as between an exposure and a disease.” [ 89 ] In the case of methodological studies all these investigations are possible. For example, Kosa et al. investigated the association between agreement in primary outcome from trial registry to published manuscript and study covariates. They found that larger and more recent studies were more likely to have agreement [ 15 ]. Tricco et al. compared the conclusion statements from Cochrane and non-Cochrane systematic reviews with a meta-analysis of the primary outcome and found that non-Cochrane reviews were more likely to report positive findings. These results are a test of the null hypothesis that the proportions of Cochrane and non-Cochrane reviews that report positive results are equal [ 90 ].

What is the sampling strategy?

Methodological studies that include the target population

Methodological reviews with narrow research questions may be able to include the entire target population. For example, in the methodological study of Cochrane HIV systematic reviews, Mbuagbaw et al. included all of the available studies ( n  = 103) [ 30 ].

Methodological studies that include a sample of the target population

Many methodological studies use random samples of the target population [ 33 , 91 , 92 ]. Alternatively, purposeful sampling may be used, limiting the sample to a subset of research-related reports published within a certain time period, or in journals with a certain ranking or on a topic. Systematic sampling can also be used when random sampling may be challenging to implement.

What is the unit of analysis?

Methodological studies with a research report as the unit of analysis

Many methodological studies use a research report (e.g. full manuscript of study, abstract portion of the study) as the unit of analysis, and inferences can be made at the study-level. However, both published and unpublished research-related reports can be studied. These may include articles, conference abstracts, registry entries etc.

Methodological studies with a design, analysis or reporting item as the unit of analysis

Some methodological studies report on items which may occur more than once per article. For example, Paquette et al. report on subgroup analyses in Cochrane reviews of atrial fibrillation in which 17 systematic reviews planned 56 subgroup analyses [ 93 ].

This framework is outlined in Fig.  2 .

A proposed framework for methodological studies

Conclusions

Methodological studies have examined different aspects of reporting such as quality, completeness, consistency and adherence to reporting guidelines. As such, many of the methodological study examples cited in this tutorial are related to reporting. However, as an evolving field, the scope of research questions that can be addressed by methodological studies is expected to increase.

In this paper we have outlined the scope and purpose of methodological studies, along with examples of instances in which various approaches have been used. In the absence of formal guidance on the design, conduct, analysis and reporting of methodological studies, we have provided some advice to help make methodological studies consistent. This advice is grounded in good contemporary scientific practice. Generally, the research question should tie in with the sampling approach and planned analysis. We have also highlighted the variables that may inform findings from methodological studies. Lastly, we have provided suggestions for ways in which authors can categorize their methodological studies to inform their design and analysis.

Availability of data and materials

Data sharing is not applicable to this article as no new data were created or analyzed in this study.

Abbreviations

Consolidated Standards of Reporting Trials

Evidence, Participants, Intervention, Comparison, Outcome, Timeframe

Grading of Recommendations, Assessment, Development and Evaluations

Participants, Intervention, Comparison, Outcome, Timeframe

Preferred Reporting Items of Systematic reviews and Meta-Analyses

Studies Within a Review

Studies Within a Trial

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Lawrence Mbuagbaw, Daeria O. Lawson & Lehana Thabane

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LM conceived the idea and drafted the outline and paper. DOL and LT commented on the idea and draft outline. LM, LP and DOL performed literature searches and data extraction. All authors (LM, DOL, LT, LP, DBA) reviewed several draft versions of the manuscript and approved the final manuscript.

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Mbuagbaw, L., Lawson, D.O., Puljak, L. et al. A tutorial on methodological studies: the what, when, how and why. BMC Med Res Methodol 20 , 226 (2020). https://doi.org/10.1186/s12874-020-01107-7

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Financial Stability Report—2024

A stable and efficient financial system is essential for sustaining economic growth and raising standards of living. In the Financial Stability Report , the Bank of Canada assesses the resilience of the Canadian financial system and identifies key risks that could undermine its stability.

This year, the Bank renamed its annual assessment of the stability of the Canadian financial system to the Financial Stability Report from the Financial System Review . This reflects a continuing evolution in how the Bank assesses risks to Canadian financial stability. In particular, the Report:

• takes more of a cross-sectoral perspective when assessing overall financial stability in Canada by accounting for interconnections among sectors in the financial system
• considers how financial system participants are building resilience against the risks to their sector and to the broader financial system

Analysis about the structure and efficiency of the financial system will continue to be covered on the Bank’s Financial System Hub .

Overall assessment

Key takeaways.

• Canada’s financial system remains resilient. Over the past year, financial system participants—including households, businesses, banks and non-bank financial institutions—have continued to proactively adjust to higher interest rates.
• Debt serviceability —Businesses and households continue to adjust to higher interest rates. Indicators of financial stress in both sectors were below historical averages through the COVID-19 pandemic but have been normalizing. Some indicators look to be increasing more sharply and warrant monitoring. Higher debt-servicing costs reduce financial flexibility for households and businesses and make them more vulnerable in the event of an economic downturn.
• Asset valuations —The valuations of some financial assets appear to have become stretched, which increases the risk of a sharp correction that can generate system-wide stress. The recent rise in leverage in the non-bank financial intermediation sector could amplify the effects of such a correction.
• The financial system is highly interconnected. Stress in one sector can spread to others.
• Participants should continue to be proactive, including planning for more adverse conditions or outcomes.

The global backdrop has generally improved over the past year, and investors’ appetite for risk has increased

Over the past 12 months, the global economic and financial environment has been marked by a further decline in inflation in advanced economies and a reduction in the risk of a major recession. However, geopolitical tensions have increased.

Financial system participants—including households, businesses, banks and non-bank financial institutions—have become increasingly focused on when and by how much central banks will reduce their policy interest rates. This has driven a renewed appetite for risk, which has pushed up the prices of a range of financial assets and driven down risk premiums and credit spreads in both Canada and the United States. Benchmark US and Canadian equity indexes reached all-time highs in 2024, and corporate credit spreads in both countries are now at or below levels seen on average since the 2008–09 global financial crisis.

Volatility and liquidity in bond markets have improved over the past 12 months, but volatility remains higher and liquidity remains lower than before central banks began increasing their policy rates. Markets have continued to function well. Trading volumes have remained relatively stable and the private sector has continued to absorb government debt, even as governments increased their issuance of debt and central banks continued their quantitative tightening programs. 1 The issuance of corporate bonds has also been robust.

Despite some improvements in the global backdrop, uncertainty remains elevated. For example, inflationary pressures globally could be higher than expected, causing markets to further reassess the timing and the pace of the expected declines in policy interest rates by some central banks, as seen recently in the United States. Geopolitical tensions—in particular, the wars in the Middle East and Ukraine—persist and could escalate. These sources of uncertainty could reduce the global appetite for risk, leading to an abrupt repricing of assets and to stress in core funding markets.

Canada’s financial system has remained resilient

Over the past 12 months, financial system participants have taken steps to enhance their resilience in the face of higher interest rates.

• Households and businesses have reduced their demand for credit, and most have maintained higher levels of liquid assets built up during the pandemic.
• A growing number of borrowers with variable-rate, fixed-payment mortgages are making lump-sum payments or increasing the value of their regular payments ahead of renewal.
• Banks have increased their provisions for loan losses and maintained their large capital buffers.
• Some asset managers have strengthened their processes for managing liquidity risks.
• Some pension funds and insurance companies have reduced their exposure to commercial real estate or written down the value of assets in the office subsector, where vacancies are high.

These actions are reducing the risks to individual borrowers and lenders as well as to overall financial stability. In addition, financial sector authorities have enhanced their regulatory and supervisory activities around risky exposures. For instance, the Office of the Superintendent of Financial Institutions has provided stricter regulatory guidance for lenders with negatively amortizing mortgages as well as commercial real estate lending. 2 It has also raised the level of the domestic stability buffer, a capital reserve that large banks can use in times of stress. 3 Market participants believe that the likelihood of a shock occurring that could impair the Canadian financial system has declined. Participants also report having a high degree of confidence in the Canadian financial system’s resilience to a severe shock, should one occur. 4

In sum, the financial system appears well positioned to manage the ongoing adjustments to elevated interest rates and the ongoing volatility in financial markets. Nevertheless, risks remain.

Risks to debt serviceability could affect the performance of lenders’ credit portfolios

Although most households are adapting to higher interest rates, some are showing increasing signs of financial stress. After hitting historical lows during the COVID‑19 pandemic, the share of borrowers without a mortgage who are behind on credit card and auto loan payments has come back up to more normal levels or has surpassed them.

The increasing stress that borrowers face has not significantly impacted large banks, but some smaller mortgage lenders have seen a sharp uptick in credit arrears. Over the coming years, more borrowers will face pressure as they refinance existing mortgages at higher interest rates. Higher debt-servicing costs reduce financial flexibility for households and businesses and make them more vulnerable in the event of an economic downturn.

Valuation risks could lead to corrections in asset prices and to market strains

Price corrections could be large and abrupt if expectations around the path for interest rates change significantly or if the economic outlook deteriorates significantly. Valuation risks could also materialize if ongoing large increases in the issuance of government debt cause term premiums and bond yields to rise.

Stretched asset valuations may not properly reflect risks to the economic outlook and therefore increase the likelihood of a disorderly price correction. Asset managers could face losses, a sharp increase in liquidity needs from redemptions or margin calls, and forced deleveraging if investors abruptly reprice risky assets. A repricing could reverse recent investor flows into corporate bonds, prompting further redemptions. The recent increase in leverage through repurchase agreements (repos) by hedge funds and pension funds could amplify the liquidity needs of these funds arising from margin calls.

In this scenario, asset managers may contribute to strains on market liquidity if they unwind fixed-income positions to meet their liquidity needs. This could cause prices for these securities to decline further, reducing market liquidity and, in extreme cases, leading to fire sales and price spirals. 5

Valuations remain under pressure in parts of the commercial real estate sector, particularly the office subsector where vacancies are high. Not all asset managers have fully reflected these reduced valuations on their balance sheets, meaning that further adjustments may be necessary in the future.

Interconnections in the financial system could transmit stress

The risks to the financial system related to debt serviceability and asset valuations are important to monitor because they could have a large impact on individual borrowers and lenders if they materialize. Links between participants could spread and amplify the impact of any shock, leading to system-wide stress.

Banks are well capitalized and have sufficient liquidity buffers, making them well positioned to continue supporting the economy, even through a period of stress.

However, stress in the global banking sector, like that seen in March 2023, could impact depositor and investor confidence. This could spark deposit outflows, even at healthy banks. Large Canadian banks could also be impacted by a disruption in global wholesale markets given their reliance on this source of funding. Funding pressures could lead banks to reduce lending and the provision of liquidity to markets.

A large-scale liquidity event could cause many financial system participants to simultaneously take actions to enhance their own resilience to stress. Such a situation could cause secondary effects, such as a fire sale of assets, that amplify and transmit stress through the system.

Participants need to continue planning for more adverse outcomes

The Bank works closely with federal and provincial financial authorities to monitor the health of Canada’s financial system. This collaboration is particularly important in areas where data gaps at an individual authority limit its ability to fully assess risks to the financial system.

While public authorities can intervene to preserve financial stability in periods of severe stress, banks and market participants should anticipate and plan for periods of stress and build adequate loss-absorption and liquidity buffers to ensure they remain resilient. In particular, market participants planning to raise cash through the sale of financial assets should consider that other market participants may also intend to sell the same type of assets to meet their liquidity needs during periods of stress.

Households and businesses should also continue to be proactive, planning for higher payments when mortgages and other debt renew at higher interest rates.

Banks can continue to support borrowers by reaching out well ahead of renewal dates and helping them plan for higher payments.

A stable and resilient financial system benefits all Canadians. Preserving financial stability requires the prudence and diligence of all financial system participants.

Households are adjusting to the rise in debt-servicing costs.

Following sharp declines during the COVID‑19 pandemic, many indicators of financial stress have now returned to more normal levels. 6 Signs of stress are concentrated primarily among households without a mortgage and survey data suggest that, of these households, renters are most affected. In contrast, indicators of stress among mortgage holders are largely unchanged, remaining at levels lower than their historical averages. Factors such as income growth, accumulated savings and reduced discretionary spending are supporting households’ ability to deal with higher debt payments.

Over the coming years, more mortgage holders will be renewing at higher interest rates. Based on market expectations for interest rates, payment increases will generally be larger for these mortgage holders than for borrowers who renewed over the past two years. Higher debt-servicing costs reduce financial flexibility for households and businesses and make them more vulnerable in the event of an economic downturn.

Signs of financial stress have risen primarily among households without a mortgage

The combination of higher inflation and higher interest rates continues to put pressure on household finances. Many indicators of financial stress, which had declined during the pandemic, are now close to pre-pandemic levels. Signs of increased financial stress appear mainly concentrated among renters. 7 , 8

The rates of arrears on credit cards and auto loans for households without a mortgage—which includes renters and outright homeowners—are back to pre-pandemic levels and continue to grow ( Chart 1 ). 9 In contrast, arrears on these products for households with a mortgage have remained low and stable.

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Households have also increased their reliance on credit card debt. Research by Bank staff finds that households relying on credit cards to finance spending are more likely to experience financial stress in the future. 10 In particular, borrowers without a mortgage who carry a credit card balance of at least 80% of their credit limit are significantly more likely to miss a future debt payment. Over the past 12 months, the share of these borrowers has continued to trend up ( Chart 2 , yellow line).

More mortgage holders will be facing higher payments in the coming years

About half of all outstanding mortgages are held by borrowers who have yet to face higher rates because their payments were fixed for five years (with either a fixed or variable mortgage rate). 11 Households that hold these mortgages will generally see a larger payment increase than those that have already renewed ( Chart 3 ). The impact of the rise in debt-servicing costs will be partially offset for households whose income has grown over the intervening period.

As mentioned in previous Reports, the financial pressure will increase most for households that took out a mortgage in 2021 and early 2022 when house prices were close to their peak and mortgage rates were very low. These borrowers generally:

• have taken on large mortgages relative to their income
• have seen little increase (and potentially a decrease) in home equity
• will see larger increases in payments at renewal

Debt-servicing costs for new mortgages remain elevated

The share of income dedicated to mortgage payments—also called the mortgage debt service ratio— has been much larger for households that took on a mortgage after interest rates started rising in 2022 relative to households that took on a mortgage in prior years ( Chart 4 ). As a result, at the end of 2023, over one-third of new mortgages had a mortgage debt service ratio greater than 25%, double the share of new mortgages with the same ratio in 2019. This growth has occurred despite households opting for smaller mortgages relative to their income and for longer amortization periods. 12

Higher debt-servicing costs reduce a household’s financial flexibility, making them more financially vulnerable if their income declines or they face an unexpected material expense.

Most households retain some financial flexibility

The rise in house prices since the beginning of the pandemic has increased equity for most homeowners. In cases where mortgage holders run into financial stress, higher levels of home equity can act as a financial buffer, leaving room for borrowers to reduce their payments.

Similarly, access to liquid assets gives households some capacity to adjust to unexpected budget pressures. Survey data show that households—regardless of homeownership status—generally have more liquid assets as a share of their income than before the pandemic ( Chart 5 ). That said, mortgage holders and renters hold fewer liquid assets as a share of their income compared with homeowners without a mortgage. In addition, the value of some of these assets could decline significantly during periods of stress when the funds are needed. 13

Non-financial businesses

Higher interest rates can affect non-financial businesses both directly—by increasing financing costs—and indirectly—by slowing the economy. So far, the financial health of large non-financial businesses has remained broadly solid, thanks in part to their diversified sources of funding and their long-term financing. However, the number of insolvency filings—which are typically submitted by small businesses—has surged recently, suggesting that small businesses are facing more financial pressure.

Overall, non-financial businesses remain in good financial health

Demand for credit by non-financial businesses has softened considerably over the past 12 months, reflecting lower economic growth and higher interest rates. More generally, the ratio of total debt to assets among non-financial businesses picked up over 2023, primarily due to lower asset valuations, but remains below pre-pandemic levels ( Chart 6 ). The liquidity position of non-financial businesses—measured by the ratio of total cash to debt—has deteriorated somewhat over the past 12 months but is still robust by historical standards.

Financial pressure is increasing for some businesses

The rise in financing costs over the past two years—either through bank or market sources of funding—and slowing economic growth have been challenging for many businesses. Since 2022, the debt-servicing costs of publicly listed businesses headquartered in Canada have risen sharply after having declined in the years before ( Chart 7 ). While interest costs as a share of earnings remain below pre-pandemic levels, this share will likely keep rising in the coming years as existing debt is refinanced at higher interest rates.

An important factor temporarily protecting large businesses from the effects of higher interest rates is the financing structure of their existing debt. In Canada, most publicly listed businesses rely on issuing bonds as their primary source of debt financing, rather than relying on bank loans. Currently, about two-thirds of the bonds on their balance sheets have a remaining maturity of five years or more. For many firms, this means the cost to finance their existing debt will not increase for some time. Over the past 12 months, spreads between corporate and government bond yields have declined below their average level since the 2008–09 global financial crisis, which is also mitigating the increase in refinancing costs for large businesses.

Smaller businesses appear to be under more financial pressure than their larger counterparts. The number of businesses in Canada filing for insolvency, which had been unusually low during the pandemic, has surpassed pre-pandemic levels by a large margin ( Box 1 ). A key reason for this rebound could be that the temporary government support programs put in place during the pandemic delayed the impacts of underlying financial pressures for some businesses and reduced the number of insolvency filings relative to pre-pandemic levels. The Bank will continue to closely monitor the level of business insolvencies and the risk they may pose for financial stability.

Box 1: A closer look at the sharp increase in the number of business insolvencies

Business insolvencies have increased steadily since early 2022 and more sharply since the middle of 2023 ( Chart 1‑A ). 14 As of March 2024, the number of businesses filing for insolvency was up significantly from a year earlier and was about double its average from before the COVID‑19 pandemic. The surge in insolvencies over the past 12 months has generally been:

• concentrated among small businesses 15
• broad-based across industries
• driven by bankruptcy filings rather than insolvency proposals 16

The run-up in business insolvencies since early 2022 likely reflects a combination of factors, including:

• higher borrowing costs
• slower economic activity
• phasing out of federal and provincial pandemic support programs

A rebound in business insolvencies from pandemic lows was to be expected. Some businesses may have been sustained throughout the pandemic by government support programs, and successive pandemic lockdowns disrupted the process for insolvency filing, particularly the use of bankruptcy courts, leading to a backlog of cases.

To better understand the rise in business insolvencies in relation to pandemic lows, we examine 19 industries in Canada (each represented by a bubble in Chart 1‑B ). We compare the cumulative deviations of insolvency filings from their pre-pandemic average (from 2016 to 2019) over two periods: 17

• from early 2020 to the end of 2022 (period of below-average number of insolvencies)­­—shown on the horizontal axis in Chart 1‑B
• from the end of 2022 onward (period of above-average number of business insolvencies)—shown on the vertical axis in Chart 1‑B

The size of each bubble in Chart 1‑B is proportional to the size of the industry. The concentration of bubbles around the diagonal 45-degree line suggests that, for many industries, the cumulative rise since the end of 2022 is similar in size to the cumulative decline from 2020 to 2022. In addition, some of the industries that saw the largest initial declines, such as retail trade and accommodation and food services, have also experienced the largest rebounds. This reinforces the idea that government support programs likely played a role in limiting insolvencies from 2020 to 2022. While higher interest rates and slowing demand have contributed to stress among businesses, the rebound in the number of insolvencies above its pre-pandemic average appears to be mainly the result of a catch-up effect in the overall number of insolvencies since 2020.

Canadian banks remain resilient. Overall, credit performance remains strong, and capital and liquidity buffers remain above regulatory minimums. Increased provisions for loan losses are impacting profitability but also enhancing banks’ resilience. Funding costs have increased, but deposit retention has remained strong and access to wholesale markets continues to be robust. The Bank will continue to monitor indicators of borrower stress and how that stress may impact the credit quality of banks’ assets.

Funding for banks remains accessible, but costs have increased

Ongoing access to stable sources of funding affects the stability of individual banks, the banking sector as a whole and the ability of banks to support the economy.

Banks rely on two main sources of funding:

• deposits of households and businesses
• funds obtained through wholesale capital markets, both domestically and internationally

While bank deposits in the United States have declined over the past 12 months, those in Canada have continued to grow, but at a higher cost for banks. As interest rates have risen, depositors have migrated to higher-yielding products such as term deposits. This translates to higher funding costs for banks. Banks generally pass these higher costs on to customers in the form of higher interest rates on loans, maintaining interest rate margins.

Large banks also rely on domestic and international wholesale markets for additional funding. This exposes large banks to strains in global fixed-income markets that could impact their access to funding during periods of stress. Large Canadian banks continue to maintain access to wholesale markets, although at a high cost. The total cost of wholesale funding for large banks has remained high, driven by yields for Government of Canada bonds.

However, bank credit spreads have declined sharply over the past year and are back to pre-pandemic levels ( Chart 8 ). This reduction has occurred against the backdrop of diminishing concerns from investors about the health of the global banking sector following the stress episode seen in March 2023. Since late 2023, investors have increased their appetite for corporate debt, suggesting greater ease of access to markets for banks.

Loan impairments at large banks remain low

Overall, the credit performance of bank assets generally remains strong. Among large banks, impairments on loans to households (including mortgages and consumer loans) are low by historical standards, despite a recent increase ( Chart 9 ).

The share of mortgages in arrears has risen more for small and medium-sized banks ( Chart 10 ). The difference in mortgage arrears at smaller lenders likely reflects differences in the borrower profiles and in the timing of mortgage renewals. Some small and medium-sized banks specialize in mortgage lending to higher-risk borrowers and typically issue more mortgages at shorter terms than other lenders. 18 As a result of these shorter terms, nearly all borrowers who took out mortgages at small lenders have already renewed at higher rates. In contrast, about half of the mortgages at large banks have yet to be renewed.

The recent rise in business insolvencies discussed in Box 1 does not represent a significant source of concern for the credit performance of banks. Businesses filing for insolvency have typically been small and represent a small share of the total business loan portfolio of banks. 19

The credit performance of loans to the commercial real estate sector—particularly the office subsector—continues to face pressure. For most Canadian banks, exposures to the office subsector are generally minimal. The Bank is closely watching developments in this area ( Box 2 ).

Banks are managing their balance sheets more cautiously

Banks have increased loan-loss provisions, which serve as an early line of defence to absorb credit losses. Allowances for loan losses at large banks—the cumulated stock of provisions expressed as a percentage of loan balances—were 20% higher in the first quarter of 2024 than before the pandemic. Smaller lenders are also improving their resilience by increasing loan-loss provisions.

Large banks continue to maintain ample buffers to meet unexpected liquidity needs and absorb unexpected losses. As of the first quarter of 2024, the average common equity Tier 1 capital ratio of large banks was 13.4%, about 2 percentage points higher than just before the start of the pandemic. 20 The average liquidity coverage ratio of large banks was 135% in the first quarter of 2024, up from 132% prior to the pandemic. 21

Box 2: Exposures to commercial real estate in the Canadian financial system

Parts of the commercial real estate (CRE) sector, particularly the office subsector, are under pressure. This reflects both cyclical and structural factors, such as higher borrowing costs and weaker demand for office space. Weaker demand has pushed the national vacancy rate up to about 20% for offices located in the downtown areas of major cities. 22 The industrial and retail subsectors have been performing relatively better, as illustrated by how market pricing of real estate investment trusts has evolved since 2020 ( Chart 2‑A ).

Various financial entities—both banks and non-banks—are active in the CRE sector, either providing lending or taking ownership stakes in real estate properties ( Table 2‑A ). Given ongoing pressures in the CRE sector, these entities face risks linked to credit or valuation losses, particularly in cases where this sector accounts for a large share of their overall assets.

Note: CRE is commercial real estate. The share of loans for large insurance companies is not available and the share of loans for large pension funds is not applicable. Sources: Financial statements of Canadian banks, large insurance companies and pension funds; regulatory filings of Canadian banks; and Bank of Canada calculations Last observations: large banks, 2024Q1; small and medium-sized banks, December 2023; large insurance companies and pension funds, respective year-end dates

For banks, exposures to the CRE sector come largely in the form of loans, including commercial mortgages and loans to real estate developers, builders and real estate investment trusts. In Canada, the CRE sector accounts for 10% of the total loan book of large banks and 20% of that of small and medium-sized banks, although with significant variation among smaller lenders.

In the United States, the loan exposure of small and medium-sized banks to the CRE sector (36%) is, on average, more than twice as large as that of their Canadian counterparts (16%). For most Canadian banks, exposures to the office subsector are generally minimal—in the range of 1% to 2% of loans—with only a few small lenders having exposure above 5% of total loans.

Among non-bank financial intermediaries, substantial data gaps limit the ability to fully assess CRE exposures. However, Statistics Canada reports that roughly half of non-residential mortgages in Canada are held by institutions other than banks and credit unions.

Canada's largest life insurance companies hold about 12% of their total invested assets in the global CRE sector, and 70% of that is held in commercial mortgages. Large public pension funds hold a slightly higher fraction of their assets in the CRE sector (15%), but their exposure is more heavily weighted toward ownership stakes than loans. About 90% of pension funds’ exposure to CRE reflects ownership stakes compared with 30% for insurance companies. Both types of entities hold only about 3% of their total invested assets in the office subsector. The ownership stakes of pension funds are mostly high-quality office properties in large city centres, which have seen more modest declines in value than office properties of lower quality.

Canadian pension funds and insurance companies are generally well equipped to absorb losses:

• They have both the diversity of holdings required to help offset impacts on their earnings and the long investment horizons necessary to absorb losses.
• They are structurally less exposed to funding and redemption risks.
• There is typically less leverage in Canadian CRE relative to CRE in the United States.

In recent months, some asset managers, including pension funds and insurance companies, have written down their exposures to the CRE sector as part of periodic asset revaluations. The extent of these revaluations has likely lagged behind the declines in market valuations shown in Chart 2‑A . This could reflect long-term valuation assumptions that investors such as pension funds and insurance companies make or a higher-quality asset base. It could also suggest that further adjustments may be necessary in the future, particularly in the office subsector.

There are two key takeaways about risks to the Canadian financial sector from commercial real estate:

• First, because many Canadian financial entities participate in the CRE sector, the risk is not concentrated in any one area of the financial system.
• Second, given their diversified loan and asset portfolios, the largest entities in the system appear to have generally limited exposures to CRE.

Risks in this area are expected to continue to evolve, and the Bank of Canada will continue to monitor this area closely.

Non-bank financial intermediaries

In Canada, a significant amount of bank-like activity occurs outside the traditional banking sector and involves non-bank financial intermediaries (NBFIs), such as non-bank lenders and asset managers (e.g., pension funds, insurance companies and fund managers). NBFIs—in particular asset managers—face liquidity risks resulting from portfolio rebalancing needs, investor redemptions and increases in margin requirements for derivative positions. They rely on core funding markets to manage these risks. 23

Asset managers’ leverage has grown over the past 12 months, led by an increase in hedge fund repo borrowings. Asset managers often take on leverage, through both repos and derivatives, to increase their return to investors and to manage risks. 24 This leverage can increase the vulnerability of asset managers in periods of volatility to liquidity needs arising from, for example, a withdrawal of funding or margin calls. Asset managers, particularly those who rely on short-term loans like repos, face the risk that they will not be able to replace maturing debt with new debt. This is known as refinancing (or rollover) risk. A rapid unwinding of repo borrowings can also have negative spillover effects on the broader repo and fixed-income markets.

In contrast, risk associated with liquidity mismatch faced by bond and money market mutual funds is broadly unchanged over 2023. Mutual funds face liquidity risks when they offer daily redemptions to investors but invest in assets, such as corporate bonds, that are relatively less liquid than other mutual fund assets. If a fund faces redemptions that exceed its available liquidity—the cash and safe assets it sets aside to meet regular and unanticipated liquidity needs—the fund may have to sell assets from its portfolio. If many asset managers try to sell similar assets over a short period of time to raise liquidity, it can amplify price movements.

Hedge funds and pension funds have significantly increased their use of repo leverage

Leverage obtained by asset managers through borrowing in the repo market increased by around 30% in the past 12 months. 25 This increase was driven largely by hedge funds and pension funds increasing their repo leverage by approximately 75% and 14%, respectively. 26 Pension funds are the largest non-bank participants in Canadian repo markets, with over $90 billion in total borrowing outstanding. These pension funds face relatively less refinancing risk than hedge funds. About half of pension fund repo leverage has a maturity greater than one month, while about 70% of hedge fund repo exposure is under one week because hedge funds tend to rely more heavily on overnight and short-term repos. Some individual repo positions held by hedge funds are also very large and highly concentrated—for example, in a single Government of Canada bond.

The largest pension funds and insurance companies are typically sophisticated users of leverage that manage their liquidity risk and use liquidity coverage ratios to monitor planned and potential outflows. 27 Nonetheless, even sophisticated users can run into difficulties during periods of market stress, as seen in the October 2022 UK pension fund experience and during the March 2020 “dash for cash.” 28

Discussions with market participants and analysis of trading data indicate that one of the drivers behind the increase in hedge fund leverage is relative-value strategies. An example is the increasingly popular cash-futures basis trade in the Government of Canada bond market (see Box 3 ). These trades can provide market liquidity in both futures and bond markets. However, the large degree of leverage employed can leave hedge funds vulnerable to changes in the price difference between the underlying securities as well as to sudden changes in the availability and cost of repo financing.

Liquidity mismatch in the mutual fund sector is broadly unchanged

The liquidity mismatch in the mutual fund sector remained roughly the same over the past 12 months. Bond fund assets grew 4.3% in 2023, while liquid holdings, composed of cash and government treasury bills and bonds, grew from 9.2% to 10.2%, as these funds reduced their share of assets in corporate bonds. Money market funds grew significantly in 2023, with assets increasing 51% to $78 billion, primarily as a result of investor inflows. Despite this growth, money market funds remain a relatively small segment of the mutual fund sector. 29 The liquidity of these funds has improved over time as the share of their assets held in cash or Government of Canada treasury bills has grown from 30.0% to 37.6%.

Many non-bank financial intermediaries are holding more liquidity

In discussions with Bank of Canada staff, asset managers report putting a greater focus on monitoring and managing liquidity risk, including increasing liquidity buffers. In the Bank’s 2024 Financial System Survey (FSS), more than half of asset managers reported that they have shifted more of their investments toward cash equivalents and government bonds since the start of monetary policy tightening in 2022 ( Chart 11 ). 30

These increased liquidity buffers should improve the ability of asset managers to absorb liquidity shocks. Asset managers should bear in mind, however, that other market participants may have liquidity buffers made up of similar assets that they also intend to sell during periods of stress. The aggregate impact of these sales during periods of stress may lead to fire-sale dynamics, transmitting stress through the financial system.

Box 3: Cash-futures basis trade

The basis trade, a relative-value strategy that has been a feature of the US Treasury market in recent years, is becoming more popular in Canada. This type of trading strategy uses a mix of long and short positions to capitalize on price differences between bonds and bond futures.

Market participants typically use a high degree of leverage—or borrowed funds—to increase profits for these trades. For example, when bond futures contracts are relatively more expensive than the underlying bond, an entity could profit from a cash-futures basis trade by selling bond futures, buying the underlying bond, and borrowing cash in repurchase agreement (repo) markets using the bond as collateral to finance the position.

Basis trades can improve market efficiency by reducing the cost of buying bond futures and supplying futures market liquidity to those who prefer holding long futures instead of bonds. 31 These trades can also pose risk in times of stress—both to those making the trades and to financial markets more generally—due to many factors.

• The pricing discrepancies tend to be quite small, so to increase the profitability of the trades, financial firms (usually large, foreign-domiciled hedge funds) often use a large degree of leverage, which they typically obtain in the repo market. Indeed, the increase in the basis trade has been cited as one of the contributing factors for the surge in demand for repo funding seen earlier this year in Canada. 32 High repo leverage, particularly when it is obtained through overnight or short-term repo maturities, can amplify sudden price movements in the underlying bond market.
• Maintaining these trades could become costly if repo rates were to spike suddenly, or if higher bond market volatility were to result in larger margin calls. The unwinding of these trades as a result of these shocks could lead to abrupt sales of fixed-income assets and, possibly, to strains on market liquidity. The more leveraged a hedge fund is, the more vulnerable it is to such shocks, and the greater the risk it poses to the overall system. This was evident in the US Treasury bond market in March 2020, when pandemic-related market stress caused many hedge funds to unwind their sizable cash-futures basis trade positions. This unwinding resulted in a large volume of US Treasury bonds being sold and contributed to the severe hampering of what is normally considered the most liquid bond market in the world. The one-way selling negatively affected market participants around the world that rely on the liquidity and stability of US Treasuries. 33 As the International Monetary Fund recently noted, the aggressive use of repo leverage can also leave these trades vulnerable to other shocks, including upside inflationary surprises that could lower the value of bonds. 34

The cash-futures basis trade is estimated to have grown steadily in Canada ( Chart 3‑A ), with exchange-for-physical transactions reaching $51 billion by the end of April 2024. 35 This represents about 8% of the total trading volume of Government of Canada bonds ( Chart 3‑B ). 36 , 37 Of the total volume, 45% is in 2-year futures contracts, and the remainder is split somewhat evenly between the 5- and 10-year futures contracts.

The growth of the basis trade in Canada has mirrored the growth of the Government of Canada bond futures market, including the reintroduction of 2- and 5-year futures contracts a few years ago. This has resulted in relatively steady shares of total futures trading volumes.

• 1. The upward pressure seen periodically in Canadian repo markets over the past 12 months is largely due to an increase in borrowing to finance investment positions rather than due to quantitative tightening. See B. Plong and N. Maru, “ What has been putting upward pressure on CORRA? ” Bank of Canada Staff Analytical Note No. 2024-4 (March 2024).[ ← ]
• 2. See Office of the Superintendent of Financial Institutions, “ 2024 Capital Adequacy Requirements (CAR) – Letter (2023) ” (letter to banks and trust and loan companies, October 20, 2023), and Office of the Superintendent of Financial Institutions, “ Commercial Real Estate Risk Management ” (regulatory notice, September 29, 2023).[ ← ]
• 3. For more information, see Office of the Superintendent of Financial Institutions, “ OSFI Reinforces Resilience of Canada’s Financial System: Sets Domestic Stability Buffer at 3.5% ” (press release, June 20, 2023).[ ← ]
• 4. For more details, please see the results of the 2024 Financial System Survey .[ ← ]
• 5. For instance, many asset managers responding to the Bank’s Financial System Survey indicated that they would rebalance their portfolios toward safer assets if interest rates were to be higher than expected. Such behaviour could contribute to unusually large price movements and, in extreme cases, fire-sale dynamics.[ ← ]
• 6. For more information, see the “ Indicators of financial vulnerabilities ” page on the Bank’s website.[ ← ]
• 7. Separating out renters from outright homeowners in the TransUnion data is not possible. Both groups are categorized as households without a mortgage .[ ← ]
• 8. The survey results show that renters were more likely than homeowners to report having their financial situation worsen in 2023 and being at risk of missing a debt payment in the next three months. See N. Bédard and P. Sabourin, “ Measuring household financial stress in Canada using consumer surveys ,” Bank of Canada Staff Analytical Note No. 2024-5 (April 2024).[ ← ]
• 9. To protect the privacy of Canadians, TransUnion did not provide any personal information to the Bank. The TransUnion dataset was anonymized, meaning it does not include information that identifies individual Canadians, such as names, social insurance numbers or addresses.[ ← ]
• 10. See J. Xiao, “The reliance of Canadians on credit card debt as a predictor of financial stress,” Bank of Canada Staff Analytical Note (forthcoming).[ ← ]
• 11. See M. teNyenhuis and A. Su, “ The impact of higher interest rates on mortgage payments ,” Bank of Canada Staff Analytical Note No. 2023-19 (December 2023).[ ← ]
• 12. For instance, 12% of new mortgages had a loan-to-income ratio above 450% at the end of 2023, a historical low. Also, 47% of new mortgages had an amortization period longer than 25 years , up from 34% in 2019.[ ← ]
• 13. This definition of liquid assets includes some financial instruments that can be converted to cash, such as equities and mutual funds, and whose value may fluctuate. This definition also includes guaranteed investment certificates, which could be subject to early withdrawal penalties.[ ← ]
• 14. The data behind this analysis are published by the Office of the Superintendent of Bankruptcy under the Bankruptcy and Insolvency Act. See Office of the Superintendent of Bankruptcy, “ Insolvency and CCAA Statistics in Canada ” (modified May 3, 2024).[ ← ]
• 15. Businesses filing for insolvency are typically small. Insolvency data reveal that the median liabilities held by businesses at the time of filing were close to $210,000 in 2023. Note that summary statistics calculated using the publicly available dataset from the Office of the Superintendent of Bankruptcy must be interpreted with some caution. This is because data on liabilities reflect what is reported as part of the filing by insolvency trustees, which need to report only $1,000 in liabilities to start the insolvency process. Since 2013, submissions that reported the minimum liabilities represented under 4% of all business insolvency filings. Also, data on liabilities are totalled by the first three digits of postal codes in the dataset.[ ← ]
• 16. Insolvency proposals allow businesses to continue operating while restructuring their debt. In contrast, under bankruptcy filings, businesses stop operating and their assets are liquidated.[ ← ]
• 17. The construction industry is somewhat of an outlier to this analysis and is excluded from Chart 1‑B for ease of illustration. Business insolvencies in construction during the pandemic were significantly below the industry’s 2016–19 average. A rebound above the construction industry’s pre-pandemic average has occurred, but only from mid-2023 onward. Because of this, the cumulative rebound is small compared with the cumulative deviations below average that were registered during the pandemic.[ ← ]
• 18. The shorter terms of mortgages issued by smaller and alternative lenders reflect the fact that high-risk borrowers usually aim to improve their credit score and transition to a prime lender at a lower mortgage rate.[ ← ]
• 19. For large banks in Canada, business lending comprises about 40% of total lending, of which loans to small businesses tend to make up a relatively small share. Among the two large banks that publish information on their business loan portfolio by firm size, loans to small and medium-sized businesses account for about 8.5% of total business loans. The liabilities of insolvent businesses (as declared at the time of filing) totaled about $11.4 billion in 2023. On the extreme assumption that all of these liabilities were owed in the form of bank loans, this would have represented only about 0.7% of all outstanding bank loans to incorporated businesses.[ ← ]
• 20. The common equity Tier 1 ratio is a measure of a bank’s capacity to absorb losses. It measures a bank’s equity, including certain regulatory adjustments, to its overall risk-weighted assets. This measure weights the value of assets for their perceived riskiness.[ ← ]
• 21. The liquidity coverage ratio measures a bank’s ability to continue to meet its obligations during a short period of acute funding stress. It is defined as the total amount of liquid assets to its net cash outflows, adjusted for assumed stressed flow rates.[ ← ]
• 22. See CBRE, “ Canada Office Figures Q4 2023 ,” Executive summary (January 9, 2024).[ ← ]
• 23. An asset is considered to be liquid if it can be traded at low cost in large quantities in a short period of time without a significant impact on its price. For more details, see S. Gungor and J. Yang, “ Has Liquidity in Canadian Government Bond Markets Deteriorated? ” Bank of Canada Staff Analytical Note No. 2017-10 (August 2017).[ ← ]
• 24. For example, pension funds and life insurance companies make use of derivatives to hedge risk related to foreign exchange and interest rates.[ ← ]
• 25. Data are as at May 1, 2023.[ ← ]
• 26. Estimates are based on transaction data reported to the Canadian Investment Regulatory Organization (CIRO) through the Market Trade Reporting System 2.0. Therefore, the estimates reflect only transactions where at least one counterparty is a CIRO-registered dealer. Only Canadian-dollar repo transactions with known maturity dates are included. These data may not fully reflect the positions of firms. For example, firms may also transact with non-CIRO-registered dealers.[ ← ]
• 27. For details on pension funds, see G. Bédard-Pagé, D. Bolduc-Zuluaga, A. Demers, J.-P. Dion, M. Pandey, L. Berger-Soucy and A. Walton, “ COVID‑19 crisis: Liquidity management at Canada’s largest public pension funds ,” Bank of Canada Staff Analytical Note No. 2021-11 (May 2021). For life insurance companies, see P. Aldridge, S. Gignac, R. Vala and A. Walton, “ Liquidity risks at Canadian life insurance companies ,” Bank of Canada Staff Analytical Note No. 2024-7 (April 2024).[ ← ]
• 28. See J.-S. Fontaine, C. Garriott, J. Johal, J. Lee and A. Uthemann, “ COVID‑19 Crisis: Lessons Learned for Future Policy Research ,” Bank of Canada Staff Discussion Paper No. 2021-2 (February 2021).[ ← ]
• 29. Money market funds comprised 2.6% of total Canadian mutual fund assets at the end of 2023.[ ← ]
• 30. The FSS also showed that a large number of firms had not significantly changed their asset composition, while some had increased their exposure to less liquid assets. For more details, see Bank of Canada, Financial System Survey highlights—2024 (May 2024).[ ← ]
• 31. See J. Sandhu and R. Vala, “ Do hedge funds support liquidity in the Government of Canada bond market? ” Bank of Canada Staff Analytical Note No. 2023-11 (August 2023).[ ← ]
• 32. See B. Plong and N. Maru, “ What has been putting upward pressure on CORRA ?” Bank of Canada Staff Analytical Note No. 2024-4 (March 2024).[ ← ]
• 33. The US Securities and Exchange Commission has subsequently required firms providing significant liquidity in the US Treasury market to register as dealers.[ ← ]
• 34. See International Monetary Fund, “ Global Financial Stability Report – The Last Mile: Financial Vulnerabilities and Risks ” (April 2024).[ ← ]
• 35. The Montréal Exchange offers market participants the ability to simultaneously take offsetting positions in fixed-income instruments and bond futures through exchange-for-physical transactions. Fixed-income instruments must have a risk profile similar to Government of Canada bonds that underly bond futures. For more details, see Montréal Exchange, “Exchange for Physical (EFPs) .”[ ← ]
• 36. See A. Uthemann and R. Vala, “How big is cash-futures basis trading in Canada’s government bond market?” Bank of Canada Staff Analytical Note (forthcoming).[ ← ]
• 37. See J. Glicoes, B. Iorio, P. Monin and L. Petrasek, “ Quantifying Treasury Cash-Futures Basis Trades ,” FEDS Notes , Board of Governors of the Federal Reserve System (March 8, 2024). Glicoes et al. estimate, using a different methodology than presented in this Report, that in the United States, positions in the basis trade ranged from US$317 billion to US$991 billion at the end of January 2024.[ ← ]
• 38. See Sandhu and Vala (2023).[ ← ]

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