1,299 Works

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.

A Financial Stability Analysis of Zombie Firms in Canada

Timothy Grieder & Juan Ortega
We measure the prevalence of zombie firms in Canada and assess how they could potentially affect the financial system.

Canadian Financial Stress and Macroeconomic Conditions

Thibaut 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.

The Term Structures of Loss and Gain Uncertainty

Bruno 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...

The Market for Acquiring Card Payments from Small and Medium-Sized Canadian Merchants

Angelika 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 experiments

Janet 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.

BoC–BoE Sovereign Default Database: Methodology, Assumptions and Sources

David 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).

Average is Good Enough: Average-inflation Targeting and the ELB

Robert 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...

Survival Analysis of Bank Note Circulation: Fitness, Network Structure and Machine Learning

Diego 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...

Liquidity Usage and Payment Delay Estimates of the New Canadian High Value Payments System

Francisco 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.

Security and convenience of a central bank digital currency

Charles 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.

Global Commodity Markets and Rebalancing in China: The Case of Copper

Jeannine Bailliu, Doga Bilgin, Kun Mo, Kurt Niquidet & Benjamin Sawatzky
Given that China accounts for about half of global copper consumption, it is reasonable to expect that any significant change in Chinese copper consumption will have an impact on the global market. This paper examines the likely impact of the rebalancing of the Chinese economy on its copper consumption over the next decade, focusing on the relationship between the copper intensity of GDP and the share of investment in GDP. We use a panel smooth...

Changing Fortunes: Long-Termism—G-Zero, Artificial Intelligence and Debt

Stephen S. Poloz
This paper discusses three long-term forces that are acting on the global economy and their implications for companies and policy-makers: 1. the transition in geopolitics away from a global order based on international cooperation, or “deglobalization”; 2. the spread of new technology, particularly artificial intelligence, through the “fourth industrial revolution”; and 3. the steady buildup of debt—public and private—in most countries. Deglobalization leads to reduced investment and the deconstruction of global value chains, which will...

Canada’s Experience with Trade Policy

Karyne B. Charbonneau, Daniel de Munnik & Laura Murphy
This paper compiles the contemporary view on three major Canadian-led trade policies that have marked Canada’s economic history since Confederation: the National Policy (1879), the Canada–US Agreement on Automotive Products (Auto Pact, 1965) and the Canada–US Free Trade Agreement (FTA, 1989, including its extension to the North American Free Trade Agreement, NAFTA, 1994). The National Policy imposed broad-based tariff increases on imported manufactured goods with the primary intention to promote the development of the Canadian...

A Calibrated Model of Intraday Settlement

Héctor Pérez Saiz, Siddharth Untawala & Gabriel Xerri
This paper estimates potential exposures, netting benefits and settlement gains by merging retail and wholesale payments into batches and conducting multiple intraday settlements in this hypothetical model of a single "calibrated payments system." The results demonstrate that credit risk exposures faced by participants in the system are largely dependent on their relative activity in the retail and wholesale payments systems. Participants experience lower exposures in the calibrated system owing to increased netting and significant gains...

A Policy Framework for E-Money: A Report on Bank of Canada Research

Seyed Mohammadreza Davoodalhosseini & Francisco Rivadeneyra
We present a policy framework for electronic money and payments. The framework poses a set of positive questions related to the areas of responsibility of central banks: payments systems, monetary policy and financial stability. The questions are posed to four broad forms of e-money: privately or publicly issued, and with centralized or decentralized verification of transactions. This framework is intended to help evaluate the trade-offs that central banks face in the decision to issue new...

Global Real Activity for Canadian Exports: GRACE

Andre Binette, Tony Chernis & Daniel de Munnik
Canadian exports have often disappointed since the Great Recession. The apparent disconnect between exports and the Bank of Canada’s current measure of foreign demand has created an impetus to search for an alternative. Based on a dynamic factor model (DFM) methodology, we use a broad range of international economic indicators (close to 300) to estimate external demand for Canadian exports. The new measure, Global Real Activity for Canadian Exports (GRACE), follows Binette et al. (2014)...

Monetary Policy Under Uncertainty: Practice Versus Theory

Rhys R. Mendes, Stephen Murchison & Carolyn A. Wilkins
For central banks, conducting policy in an environment of uncertainty is a daily fact of life. This uncertainty can take many forms, ranging from incomplete knowledge of the correct economic model and data to future economic and geopolitical events whose precise magnitudes and effects cannot be known with certainty. The objective of this paper is to summarize and compare the main results that have emerged in the literature on optimal monetary policy under uncertainty with...

Communicating Uncertainty in Monetary Policy

Sharon Kozicki & Jill Vardy
While central banks cannot provide complete foresight with respect to their future policy actions, it is in the interests of both central banks and market participants that central banks be transparent about their reaction functions and how they may evolve in response to economic developments, shocks, and risks to their outlooks. This paper outlines the various ways in which the Bank of Canada seeks to explain its economic outlook and monetary policy decisions, with an...

Who Pays? CCP Resource Provision in the Post-Pittsburgh World

Jorge Cruz Lopez & Ben Fung
At the Pittsburgh Summit in 2009, G20 countries announced their commitment to clear all standardized over-the-counter (OTC) derivatives through central counterparties (CCPs). Since then, CCPs have become increasingly important and there has been an extensive program of regulatory enhancements to both them and OTC derivatives markets. However, as OTC clearing has grown, tensions have emerged among market participants over CCPs’ traditional model of resource provision through loss mutualization. We argue that most of these tensions...

A New Measure of the Canadian Effective Exchange Rate

Russell Barnett, Karyne B. Charbonneau & Guillaume Poulin-Bellisle
Canada’s international competitiveness has received increasing attention in recent years as exports have fallen short of expectations and Canada has lost market share. This paper asks whether the Bank of Canada’s current effective exchange rate measure, the CERI, is still an accurate measure of Canada’s international competitiveness. Overall, while the CERI represented an improvement over previous measures when it was introduced, we find that it has several drawbacks that make it less well suited to...

Credit Risk and Collateral Demand in a Retail Payment System

Héctor Pérez Saiz & Gabriel Xerri
The recent financial crisis has led to the development of new regulations to control risk in designated payment systems, and the implementation of new credit risk management standards is one of the key issues. In this paper, we study various credit risk management schemes for the Canadian retail payment system (ACSS) that are designed to cover the exposure of a defaulting member. We consider schemes that use a collateral pool calculated using a rolling time...

Using Speed and Credit Limits to Address the Procyclicality of Initial Margin at Central Counterparties

Nikil Chande & Nicholas Labelle
This paper proposes a practical approach to address the procyclicality of initial margin at central counterparties (CCPs) that can work even in periods of extreme stress. The approach allows CCPs to limit the speed of margin increases resulting from spikes in market volatility. To maintain the desired level of risk protection, the model covers, through loss-sharing arrangements, a chosen number of the largest shares of the margin increases that are deemed procyclical. To facilitate adoption...

2013 Methods-of-Payment Survey Results

Christopher Henry, Kim Huynh & Rallye Shen
As the sole issuer of bank notes, the Bank of Canada conducts methods-of-payment (MOP) surveys to obtain a detailed and representative snapshot of Canadian payment choices, with a focus on cash usage. Overall, cash usage at the point of sale has decreased since 2009, constituting 44 per cent of payment volume and 23 per cent in terms of value, and the median value of a cash transaction is about $9. Respondents’ perceptions and demographic factors...

Public Policy Objectives and the Next Generation of CPA Systems: An Analytical Framework

James Chapman, Jonathan Chiu, Sajjad Jafri & Héctor Pérez Saiz
The payments landscape in Canada is rapidly changing and will continue to evolve, fuelled by strong and persistent drivers. In Canada, the Canadian Payments Association (CPA) is on a path to modernize Canada’s core payment systems. This paper contributes to the discussion in three ways. First, it translates the government’s public policy objectives (PPOs) for the broad payments ecosystem into desired outcomes for CPA payment systems. Second, it develops a taxonomy for clearly describing the...

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  • Bank of Canada
  • European Central Bank
  • University of Michigan–Ann Arbor
  • Université Laval
  • University of Quebec at Montreal
  • Simon Fraser University
  • Federal Reserve Bank of New York
  • De Nederlandsche Bank
  • International Monetary Fund
  • Federal Reserve Board of Governors