Sample Calibration of the Online CFM SurveyMarie-Helene Felt & David Laferrière
The Bank of Canada’s Currency Department has used the Canadian Financial Monitor (CFM) survey since 2009 to track Canadians’ cash usage, payment card ownership and usage, and the adoption of payment innovations. A new online CFM survey was launched in 2018. Because it uses non-probability sampling for data collection, selection bias is very likely. We outline various methods for obtaining survey weights and discuss the associated conditions necessary for these weights to eliminate selection bias....
COVID-19 and bond market liquidity: alert, isolation and recoveryJean-Sébastien Fontaine, Hayden Ford & Adrian Walton
The disruption due to COVID-19 reverberated through the bond markets in three phases. In the first phase, dealers met the rising demand for liquidity. In the second, dealers reduced the supply of liquidity, and trading conditions worsened significantly. Finally, the market returned to relative stability following several interventions by the Bank of Canada.
The Effect of Oil Price Shocks on Asset Markets: Evidence from Oil Inventory NewsRon Alquist, Reinhard Ellwanger & Jianjian Jin
We quantify the reaction of U.S. equity, bond futures, and exchange rate returns to oil price shocks driven by oil inventory news.
A Uniform Currency in a Cashless EconomyWalter Engert & Ben Fung
A number of questions can arise when considering the implications of a cashless society. This note considers whether cash is necessary for a uniform currency.
What do high-frequency expenditure network data reveal about spending and inflation during COVID‑19?Kim Huynh, Helen Lao, Patrick Sabourin & Angelika Welte
The official consumer price index (CPI) inflation measure, based on a fixed basket set before the COVID 19 pandemic, may not fully reflect what consumers are currently experiencing. We partnered with Statistics Canada to construct a more representative index for the pandemic with weights based on real-time transaction and survey data.
Child Skill Production: Accounting for Parental and Market-Based Time and Goods InvestmentsElizabeth Caucutt, Lance Lochner, Joseph Mullins & Youngmin Park
Can daycare replace parents’ time spent with children? We explore this by using data on how parents spend time and money on children and how this spending is related to their child’s development.
Is Central Bank Currency Fundamental to the Monetary System?Hanna Armelius, Carl Andreas Claussen & Scott Hendry
In this paper, we discuss whether the ability of individuals to convert commercial bank money (i.e., bank deposits) into central bank money is fundamentally important for the monetary system. This is a significant question since the use of cash—the only form of central bank money that the public currently has access to—is declining rapidly in many countries. The question is highly relevant to the discussion around whether central banks need to issue a retail central...
A Spatial Model of Bank Branches in CanadaHeng Chen & Matthew Strathearn
This study explores the market structure of the Canadian banking industry at the postal-code level. In particular, we study the effect of geographic and industrial concentration on the density of bank branches. Our analysis makes use of a novel dataset of bank branch locations across Canada over the period 2008 to 2018. We employ a spatial panel model with two-way fixed effects that accounts for spatial spillovers across adjacent postal codes. This encompassing model allows...
The Power of Many: Assessing the Economic Impact of the Global Fiscal StimulusCarlos De Resende, Rene Lalonde & Stephen Snudden
The Bank of Canada Global Economy Model (BoC-GEM) is used to examine the effect of various types of discretionary fiscal policies on different regions of the globe. The BoC-GEM is a microfounded dynamic stochastic general-equilibrium global model with six regions, multiple sectors, and international linkages. The authors use the model to assess four main fiscal policy concerns: (i) how the effect of an isolated local fiscal stimulus differs from one jointly implemented in all regions;...
The Effect of Mortgage Rate Resets on Debt: Evidence from TransUnion (Part I)Katya Kartashova
This note studies how decreases in mortgage rates affect the behaviour of borrowers in terms of spending on durable goods and repaying debt.
BoC–BoE Sovereign Default Database: Methodology, Assumptions and SourcesDavid Beers, Elliot Jones & John Walsh
Until recently, few efforts have been made to systematically measure and aggregate the nominal value of the different types of sovereign government debt in default. To help fill this gap, the Bank of Canada (BoC) developed a comprehensive database of sovereign defaults that is posted on its website and updated in partnership with the Bank of England (BoE).
The Market for Acquiring Card Payments from Small and Medium-Sized Canadian MerchantsAngelika Welte & Jozsef Molnar
This note uses industry data and a unique dataset of small and medium-sized merchants to provide insights into the acquirer-merchant market in Canada.
CBDC adoption and usage: some insights from field and laboratory experimentsJanet Hua Jiang
This note discusses insights from historical launches of new payment methods and related laboratory experiments on the potential adoption and use of a central bank digital currency in the Canadian context.
Survival Analysis of Bank Note Circulation: Fitness, Network Structure and Machine LearningDiego Rojas, Juan Estrada, Kim Huynh & David T. Jacho-Chávez
"The main objective of this research is to understand bank note distribution patterns. We do this in a novel way—by looking at bank notes through the lens of big data analytics. We use data from the Bank of Canada's Currency Information Management Strategy (IMS) to study the notes themselves. We perform an exploratory analysis of the networks spanned by the bank notes’ circulation across 10 regions in Canada. The analysis focuses on how long the...
Average is Good Enough: Average-inflation Targeting and the ELBRobert Amano, Stefano Gnocchi, Sylvain Leduc & Joel Wagner
The Great Recession and current pandemic have focused attention on the constraint on nominal interest rates from the effective lower bound. This has renewed interest in monetary policies that embed makeup strategies, such as price-level or average-inflation targeting. This paper examines the properties of average-inflation targeting in a two-agent New Keynesian (TANK) model in which a fraction of firms have adaptive expectations. We examine the optimal degree of history dependence under average-inflation targeting and find...
Security and convenience of a central bank digital currencyCharles M. Kahn & Francisco Rivadeneyra
An anonymous token-based central bank digital currency (CBDC) would pose certain security risks to users. These risks arise from how balances are aggregated, from their transactional use and from the competition between suppliers of aggregation solutions.
Canadian Financial Stress and Macroeconomic ConditionsThibaut Duprey
Severe disruptions in the financial markets, as observed during the 2008 global financial crisis or the COVID-19 pandemic, can impair the stability of the entire financial system and worsen macroeconomic downturns.
Liquidity Usage and Payment Delay Estimates of the New Canadian High Value Payments SystemFrancisco Rivadeneyra & Nellie Zhang
As part of modernizing its core payments infrastructure, Canada will replace the Large Value Transfer System (LVTS) with a new Real-Time Gross Settlement (RTGS) system called Lynx. An important question for policy-makers is how Lynx should be designed.
The Term Structures of Loss and Gain UncertaintyBruno Feunou, Ricardo Lopez Aliouchkin, Roméo Tedongap & Lai Xu
"We investigate the uncertainty around stock returns at different investment horizons. Since a return is either a loss or a gain, we categorize return uncertainty into these two components. Loss uncertainty is the uncertainty surrounding negative returns, and gain uncertainty is the uncertainty surrounding any future gain. Investment opportunities can be evaluated by looking at these components. Using data from a large panel of S&P 500 Index options with time to maturity ranging from 1...
A Financial Stability Analysis of Zombie Firms in CanadaTimothy Grieder & Juan Ortega
We measure the prevalence of zombie firms in Canada and assess how they could potentially affect the financial system.
India and the Global Demand for Commodities: Is There an Elephant in the Room?Michael Francis & Corinne Luu
After 10 years of impressive growth, India is now the fourth largest economy in the world. Yet, to date, India's impact on global commodity markets has been muted. The authors examine how India's domestic and trade policies have distorted and constrained its demand for commodities. They find that India's industrial policies have altered the expansion path of its economy, putting the service sector to the forefront and likely reducing India's demand for metals. Sector-specific policies,...
Social Learning and Monetary Policy at the Effective Lower BoundJasmina Arifovic, Alex Grimaud, isabelle salle & Gauthier Vermandel
The first contribution of this paper is to develop a model that jointly accounts for the missing disinflation in the wake of the Great Recession and the subsequently observed inflation-less recovery. The key mechanism works through heterogeneous expectations that may durably lose their anchorage to the central bank (CB)’s target and coordinate on particularly persistent below-target paths. We jointly estimate the structural and the learning parameters of the model by matching moments from both macroeconomic...
Welfare Analysis of Equilibria With and Without Early Termination Fees in the US Wireless IndustryJoseph Cullen, Nicolas Schutz & Oleksandr Shcherbakov
The elimination of long-term contracts and early termination fees (ETFs) in the US wireless industry at the end of 2015 increased monthly service fees by 2 to 5 percent. Nevertheless, consumers are clearly better off without ETFs. While firms’ revenues from ETFs vanish, their profits from monthly fees increase. As a result, the overall effect on producer profits is less clear.
The Interplay of Financial Education, Financial Literacy, Financial Inclusion and Financial Stability: Any Lessons for the Current Big Tech Era?Nicole Jonker & Anneke Kosse
"The effort to make financial services accessible and affordable for everyone is known as financial inclusion. Large technology firms, such as Apple, Alibaba, Amazon, Facebook, eBay, Google and Tencent, have recently started to offer financial services that include payment, insurance and loans. The entry of these so-called big techs could pose opportunities as well as challenges related to financial inclusion. On one hand, big techs have the potential to draw large numbers of people who...
Primary Dealers and the Demand for Government DebtJason Allen, Jakub Kastl & Milena Wittwer
"The main objectives of debt management are to raise stable and low-cost funding to meet the government’s financial needs and to maintain a well-functioning market for government securities. A challenge is determining how to sell government debt: the sale format, the choice of securities to offer and the allocation across different maturities. This paper focuses on the allocation of debt across maturities. We propose a method for identifying dependencies in the demand for securities of...
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