E58 - Central Banks and Their Policies

• Explaining Unusual Cash Patterns in 2018

  Staff Analytical Note 2019-22 Walter Engert, Ben Fung, Jozsef Molnar, Gradon Nicholls

  There was an unusually large decline of bank notes in circulation in October 2018. Some have argued that this was due to the legalization of cannabis in Canada in mid-October.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Bank notes, Digital currencies and fintech, Financial services JEL Code(s): E, E4, E41, E42, E5, E58

• The Effects of Inflation Targeting for Financial Development

  Staff Analytical Note 2019-21 Geoffrey R. Dunbar, Amy (Qijia) Li

  The adoption of inflation targeting (IT) by central banks leads to an increase of 10 to 20 percent in measures of financial development, with a lag. We also find evidence that the financial sector benefits of IT adoption were higher for early-adopting central banks.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Financial institutions, Inflation targets, Monetary policy transmission JEL Code(s): E, E4, E44, E5, E58

• Bank Market Power and Central Bank Digital Currency: Theory and Quantitative Assessment

  Staff Working Paper 2019-20 Jonathan Chiu, Mohammad Davoodalhosseini, Janet Hua Jiang, Yu Zhu

  Many central banks are considering whether to issue a new form of electronic money that would be accessible to the public. This new form is usually called a central bank digital currency (CBDC). Issuing a CBDC would have implications for the financial system and, more broadly, the wider economy.

  Content Type(s): Staff research, Staff working papers Topic(s): Digital currencies and fintech, Market structure and pricing, Monetary policy, Monetary policy framework JEL Code(s): E, E5, E50, E58

• The Neutral Rate in Canada: 2019 Update

  Staff Analytical Note 2019-11 Thomas J. Carter, Xin Scott Chen, José Dorich

  This note provides an update on Bank of Canada staff’s assessment of the Canadian neutral rate. The neutral rate is the policy rate needed to keep output at its potential level and inflation at target once the effects of any cyclical shocks have dissipated. This medium- to long-run concept serves as a benchmark for gauging the degree of monetary stimulus provided by a given policy setting.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Economic models, Interest rates, Monetary policy JEL Code(s): E, E4, E40, E43, E5, E50, E52, E58, F, F4, F41

• Crypto ‘Money’: Perspective of a Couple of Canadian Central Bankers

  Staff Discussion Paper 2019-1 James Chapman, Carolyn A. Wilkins

  The market for cryptoassets has exploded in size in the 10 years since bitcoin was launched. The technology underlying cryptoassets, blockchain, has also been held up as a technology that promises to transform entire industries.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Bank notes, Digital currencies and fintech, Financial services, Payment clearing and settlement systems JEL Code(s): E, E4, E41, E42, E5, E51, E58, H, H4, P, P4, P43

• Credibility, Flexibility and Renewal: The Evolution of Inflation Targeting in Canada

  Staff Discussion Paper 2018-18 Thomas J. Carter, Rhys R. Mendes, Lawrence L. Schembri

  In 1991, Canada became the second country to adopt an inflation target as a central pillar of its monetary policy framework. The regime has proven much more successful than initially expected, both in achieving price stability and in stabilizing the real economy against a wide range of shocks.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Credibility, Inflation targets, Monetary policy, Monetary policy framework JEL Code(s): E, E5, E52, E58, E6, E61

• Should the Central Bank Issue E-money?

  Staff Working Paper 2018-58 Charles M. Kahn, Francisco Rivadeneyra, Tsz-Nga Wong

  Should a central bank take over the provision of e-money, a circulable electronic liability? We discuss how e-money technology changes the tradeoff between public and private provision, and the tradeoff between e-money and a central bank's existing liabilities like bank notes and reserves.

  Content Type(s): Staff research, Staff working papers Topic(s): Bank notes, Digital currencies and fintech, Financial services, Payment clearing and settlement systems JEL Code(s): E, E4, E42, E5, E51, E58

• Following the Money: Evidence for the Portfolio Balance Channel of Quantitative Easing

  Staff Working Paper 2018-33 Itay Goldstein, Jonathan Witmer, Jing Yang

  Recent research suggests that quantitative easing (QE) may affect a broad range of asset prices through a portfolio balance channel. Using novel security-level holding data of individual US mutual funds, we establish evidence that portfolio rebalancing occurred both within and across funds.

  Content Type(s): Staff research, Staff working papers Topic(s): Monetary policy, Monetary policy implementation, Monetary policy transmission JEL Code(s): E, E5, E58, G, G2, G23

• Assessing the Impact of Demand Shocks on the US Term Premium

  Staff Discussion Paper 2018-7 Russell Barnett, Konrad Zmitrowicz

  During and after the Great Recession of 2008–09, conventional monetary policy in the United States and many other advanced economies was constrained by the effective lower bound (ELB) on nominal interest rates. Several central banks implemented large-scale asset purchase (LSAP) programs, more commonly known as quantitative easing or QE, to provide additional monetary stimulus.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Financial markets, Interest rates, Monetary policy framework, Monetary policy implementation, Monetary policy transmission JEL Code(s): E, E4, E43, E5, E52, E58, E6, E61, E65, G, G1, G12

• The Neutral Rate in Canada: 2018 Estimates

  Staff Analytical Note 2018-22 Xin Scott Chen, José Dorich

  The neutral nominal policy rate serves as a benchmark for assessing the degree of monetary stimulus and provides a medium- to long-run anchor for the policy rate. Since quantitative measures of the neutral rate are subject to considerable uncertainty, Bank staff rely on four different approaches to estimate the Canadian neutral rate.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Economic models, Interest rates, Monetary policy JEL Code(s): E, E4, E40, E43, E5, E50, E52, E58, F, F4, F41