Staff discussion papers
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The Canadian Neutral Rate of Interest through the Lens of an Overlapping-Generations Model
We use a small open economy model with overlapping generations to evaluate secular dynamics of the neutral rate in Canada from 1980 to 2018. We find that changes in both foreign and domestic factors resulted in a protracted decline in the neutral rate. -
Central Bank Digital Currencies and Banking: Literature Review and New Questions
We review the nascent but fast-growing literature on central bank digital currencies (CBDCs), focusing on their potential impacts on private banks. We evaluate these impacts in three areas of traditional banking: payments, lending and liquidity and maturity transformation. We also take a broader look at CBDCs and highlight two promising directions for future research. -
The 2021–22 Surge in Inflation
The rise in inflation in 2021–22 sparked a growing literature and debate over the causes of the surge as well as the near- and medium-term path for inflation. This review offers three key messages. -
Summaries of Central Bank Policy Deliberations: A Canadian Context
This paper provides the context, rationale and key considerations that informed the Bank of Canada’s decision to publish a summary of monetary policy deliberations. It includes an analysis of how other central banks disclose minutes and summaries of their monetary policy deliberations. -
The 2021–22 Merchant Acceptance Survey Pilot Study
The rise in digital payment innovations has spurred a discussion about the future of cash at the point of sale. The Bank conducted the 2021–22 Merchant Acceptance Survey Pilot Study to study trends in merchant cash acceptance and monitor conditions for the potential issuance of a central bank digital currency. -
2021 Methods-of-Payment Survey Report
We present results from the 2021 Methods-of-Payment Survey, including updated payment shares. We highlight long-term trends and provide additional context for results with respect to the COVID-19 pandemic. -
Financial Constraints and Corporate Investment in China
Financial constraints deter firms from pursuing optimal investment plans. In China, we find privately owned firms face greater financial constraints than state-owned enterprises (SOEs). This can be explained by our finding that lenders appear less concerned about the credit risk of SOEs, which causes distortions in the allocation of credit. -
The Relative Benefits and Risks of Stablecoins as a Means of Payment: A Case Study Perspective
Our paper contributes to the discussion about the utility of stablecoins for retail payments through an objective, evidence-based approach that compares stablecoins with traditional retail payment methods. The paper also provides insights that could be useful in the design of central bank digital currencies. -
Stablecoins and Their Risks to Financial Stability
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.