E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit

• Managing GDP Tail Risk

  Staff Working Paper 2020-3 Thibaut Duprey, Alexander Ueberfeldt

  Models for macroeconomic forecasts do not usually take into account the risk of a crisis—that is, a sudden large decline in gross domestic product (GDP). However, policy-makers worry about such GDP tail risk because of its large social and economic costs.

  Content Type(s): Staff research, Staff working papers Topic(s): Central bank research, Economic models, Financial stability, Financial system regulation and policies, Interest rates, Monetary policy, Monetary policy framework JEL Code(s): D, D8, E, E4, E44, E5, E52, E58, G, G0, G01

• Social Learning and Monetary Policy at the Effective Lower Bound

  Staff Working Paper 2020-2 Jasmina Arifovic, Alex Grimaud, Isabelle Salle, Gauthier Vermandel

  This research develops a model in which the economy is directly influenced by how pessimistic or optimistic economic agents are about the future. The agents may hold different views and update them as new economic data become available.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Central bank research, Credibility, Economic models, Monetary policy, Monetary policy communications JEL Code(s): C, C8, C82, E, E3, E32, E5, E52

• Monetary Policy and Government Debt Dynamics Without Commitment

  Staff Working Paper 2019-52 Dmitry Matveev

  I show that maturity considerations affect the optimal conduct of monetary and fiscal policy during a period of government debt reduction. I consider a New Keynesian model and study a dynamic game of monetary and fiscal policy authorities without commitment, characterizing the incentives that drive the choice of interest rate.

  Content Type(s): Staff research, Staff working papers Topic(s): Fiscal policy, Monetary policy JEL Code(s): E, E5, E52, E6, E62, E63

• Furor over the Fed : Presidential Tweets and Central Bank Independence

  Staff Analytical Note 2019-33 Antoine Camous, Dmitry Matveev

  We illustrate how market data can be informative about the interactions between monetary and fiscal policy. Federal funds futures are private contracts that reflect investor’s expectations about monetary policy decisions.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Central bank research, Credibility, Financial markets, Monetary policy JEL Code(s): E, E4, E44, E5, E52, E58

• Cashless Bank Branches in Canada

  Staff Analytical Note 2019-29 Walter Engert, Ben Fung

  Cashless or tellerless bank branches have proliferated in several countries in recent years. In a cashless bank branch, teller or counter services such as cash withdrawals, deposits and cheque-cashing are not available.

  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, E51

• The Economics of Cryptocurrencies—Bitcoin and Beyond

  Staff Working Paper 2019-40 Jonathan Chiu, Thorsten Koeppl

  Since the creation of Bitcoin in 2009, over 2,000 cryptocurrencies have been issued. We evaluate how well a cryptocurrency functions as a payment system.

  Content Type(s): Staff research, Staff working papers Topic(s): Digital currencies and fintech, Monetary policy, Payment clearing and settlement systems JEL Code(s): E, E4, E5, L, L5

• A Comprehensive Evaluation of Measures of Core Inflation in Canada: An Update

  Staff Discussion Paper 2019-9 Helen Lao, Ceciline Steyn

  We provide an updated evaluation of the value of various measures of core inflation that could be used in the conduct of monetary policy. We find that the Bank of Canada’s current preferred measures of core inflation—CPI-trim, CPI-median and CPI-common—continue to outperform alternative core measures across a range of criteria.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Inflation and prices, Monetary policy framework JEL Code(s): E, E3, E31, E5, E52

• Financial Frictions, Durable Goods and Monetary Policy

  Staff Working Paper 2019-31 Ugochi Emenogu, Leo Michelis

  Financial frictions affect how much consumers spend on durable and non-durable goods. Borrowers can face both loan-to-value (LTV) constraints and payment-to-income (PTI) constraints.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial system regulation and policies, Monetary policy JEL Code(s): E, E4, E44, E5, E52

• A Tale of Two Countries: Cash Demand in Canada and Sweden

  Staff Discussion Paper 2019-7 Walter Engert, Ben Fung, Björn Segendorf

  Cash use for payments has been steadily decreasing in many countries, including Canada and Sweden. This might suggest an evolution toward a cashless society. But in Canada, cash in circulation relative to GDP has been stable for decades and has even increased in recent years. By contrast, the cash-to-GDP ratio in Sweden has been falling steadily. What has caused this difference? Are there lessons to be learned from comparing the Canadian and Swedish experiences?

  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

• An Application of Shapley Value Cost Allocation to Liquidity Savings Mechanisms

  Staff Working Paper 2019-26 Rod Garratt

  Liquidity demands in real-time gross settlement payment systems can be enormous. To reduce the liquidity requirement, central banks around the world have implemented liquidity savings mechanisms (LSMs).

  Content Type(s): Staff research, Staff working papers Topic(s): Payment clearing and settlement systems JEL Code(s): C, C7, C72, E, E5, E58