Research - Bank of Canada
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Bank of Canada RSS Feedsen2024-03-28T09:36:43+00:00Regulatory Requirements of Banks and Arbitrage in the Post-Crisis Federal Funds Market
https://www.bankofcanada.ca/2022/11/staff-working-paper-2022-48/
This paper explains the nature of interest rates in the U.S. federal funds market after the 2007-09 financial crisis. We build a model of the over-the-counter lending market that incorporates new aspects of the financial system: abundance of liquidity, different regulatory standards for banks, and arbitrage opportunities created by limited access to the facility granting interest on excess reserves.2022-11-28T14:49:49+00:00enRegulatory Requirements of Banks and Arbitrage in the Post-Crisis Federal Funds Market2022-11-28Central bank researchEconomic modelsFinancial institutionsFinancial marketsFinancial stabilityFinancial system regulation and policiesWholesale fundingStaff Working Paper 2022-48https://www.bankofcanada.ca/wp-content/uploads/2022/11/swp2022-48.pdfStaff Working Paper 2022-48Rodney J. GarrattSofia PriazhkinaNovember 2022EE4E42E5E58GG2G28Stablecoins and Their Risks to Financial Stability
https://www.bankofcanada.ca/2022/11/staff-discussion-paper-2022-20/
What risks could stablecoins pose to the financial system? We argue that the stabilization mechanisms of stablecoins give rise to the risk of confidence runs, which can propagate to broader cryptoasset markets and the traditional financial sector. We also argue that stablecoins can contribute to financial stability risks by facilitating the buildup of leverage and liquidity mismatch in decentralized finance. Such risks cannot be addressed by ensuring the price stability of stablecoins alone. Finally, we explore the potential implications of stablecoins for the current system of bank-intermediated credit and for monetary policy.2022-11-28T14:39:47+00:00frStablecoins and Their Risks to Financial Stability2022-11-28Digital currencies and fintechFinancial institutionsFinancial marketsFinancial stabilityFinancial system regulation and policiesStaff Discussion Paper 2022-20https://www.bankofcanada.ca/wp-content/uploads/2022/11/sdp2022-20.pdfStaff Discussion Paper 2022-20Cameron MacDonaldLaura ZhaoNovember 2022EE4E42E44E5E58GG2G23Variable-rate mortgages with fixed payments: Examining trigger rates
https://www.bankofcanada.ca/2022/11/staff-analytical-notes-2022-19/
We estimate the share of variable-rate mortgages with fixed payments that reached the so-called trigger rate—the interest rate at which mortgage payments no longer cover the principal. Amid rising interest rates, this share was close to 50% at the end of October 2022 and could potentially reach 65% in 2023.2022-11-22T11:43:13+00:00enVariable-rate mortgages with fixed payments: Examining trigger rates2022-11-22Are Working Hours Complements in Production?
https://www.bankofcanada.ca/2022/11/staff-working-paper-2022-47/
Using Canadian matched employer-employee data, we show that working hours of different workers are gross complements in production rather than perfect substitutes, as is typically assumed by macroeconomic models of production.2022-11-21T14:02:45+00:00enAre Working Hours Complements in Production?2022-11-21Economic modelsLabour marketsStaff Working Paper 2022-47https://www.bankofcanada.ca/wp-content/uploads/2022/11/swp2022-47.pdfStaff Working Paper 2022-47Lin ShaoFaisal SohailEmircan YurdagulNovember 2022EE2E23JJ2J22J23J3J31Canada’s Beveridge curve and the outlook for the labour market
https://www.bankofcanada.ca/2022/11/staff-analytical-note-2022-18/
Canada’s labour market is tight but beginning to ease. Unemployment will likely rise in turn, but the economy can avoid a recessionary surge given current conditions. Higher unemployment would nonetheless be material, especially for those directly impacted.2022-11-17T14:22:04+00:00enCanada’s Beveridge curve and the outlook for the labour market2022-11-17Stagflation and Topsy-Turvy Capital Flows
https://www.bankofcanada.ca/2022/11/staff-working-paper-2022-46/
Unregulated capital flows are likely excessive during a stagflation episode, owing to a macroeconomic externality operating through the economy’s supply side. Inflows raise domestic wages and cause unwelcome upward pressure on firm costs, yet market forces likely generate such inflows. Optimal capital flow management instead requires net outflows.2022-11-10T10:24:04+00:00enStagflation and Topsy-Turvy Capital Flows2022-11-10Inflation and pricesInternational financial marketsInternational topicsMonetary policyStaff Working Paper 2022-46https://www.bankofcanada.ca/wp-content/uploads/2022/11/swp2022-46.pdfStaff Working Paper 2022-46Julien BenguiLouphou CoulibalyNovember 2022DD6D62EE5E52FF3F32F38F4F41Core inflation over the COVID-19 pandemic
https://www.bankofcanada.ca/2022/11/staff-analytical-note-2022-17/
We assess the usefulness of various measures of core inflation over the COVID-19 pandemic. We find that Cpi-trim and CPI-median provided the best signal of underlying inflation. The favourable performance of these measures stems from their lack of reliance on historical experience, an especially valuable feature in unprecedented times.2022-11-07T16:07:43+00:00enCore inflation over the COVID-19 pandemic2022-11-07Fiscal Policy in the Age of COVID-19: Does It “Get in All of the Cracks”?
https://www.bankofcanada.ca/2022/11/staff-working-paper-2022-45/
The COVID-19 pandemic has caused an atypical recession in which some sectors of the economy boomed and others collapsed. This required a unique fiscal policy reaction to both support firms and stimulate activity in sectors with slack. Was fiscal policy able to get where it was needed? Mostly, yes.2022-11-07T12:55:12+00:00enFiscal Policy in the Age of COVID-19: Does It “Get in All of the Cracks”?2022-11-07Coronavirus disease (COVID-19)Firm dynamicsFiscal policyInternational topicsStaff Working Paper 2022-45https://www.bankofcanada.ca/wp-content/uploads/2022/11/swp2022-45.pdfStaff Working Paper 2022-45Pierre-Olivier GourinchasŞebnem Kalemli-ÖzcanVeronika PenciakovaNicholas SanderNovember 2022DD5D57EE6E62FF4F41Considerations for the allocation of non-default losses by financial market infrastructures
https://www.bankofcanada.ca/2022/11/staff-analytical-note-2022-16/
Non-default losses of financial market infrastructures (FMIs) have gained attention due to their potential impacts on FMIs and FMI participants, and the lack of a common approach to address them. A key question is, who should absorb these losses?2022-11-03T12:32:09+00:00enConsiderations for the allocation of non-default losses by financial market infrastructures2022-11-03