The potential effect of a central bank digital currency on deposit funding in Canada
A retail central bank digital currency denominated in Canadian dollars could, in theory, create competition for bank deposit funding.
G1 - General Financial Markets
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BoC-BoE Sovereign Default Database: What’s New in 2020?
The Boc–BoE database of sovereign debt defaults, published and updated annually by the Bank of Canada and the Bank of England, provides comprehensive estimates of stocks of government obligations in default. The 2020 edition includes a new section examining the scale of domestic arrears in 2018. -
BoC–BoE Sovereign Default Database: Methodology, Assumptions and Sources
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). -
Monetary Policy Independence and the Strength of the Global Financial Cycle
We propose a new strength measure of the global financial cycle by estimating a regime-switching factor model on cross-border equity flows for 61 countries. We then assess how the strength of the global financial cycle affects monetary policy independence, which is defined as the response of central banks' policy interest rates to exogenous changes in inflation. -
Trading for Bailouts
In times of high uncertainty, governments often implement interventions such as bailouts to financial institutions. To use public resources efficiently and to avoid major spillovers to the rest of the economy, policy-makers try to identify which institutions should receive assistance. -
Trading on Long-term Information
Investors who trade based on good research are said to be the backbone of stock markets: They conduct research to discover the value of stocks and, through their trading, guide financial prices to reflect true value. What can make their job difficult is that high-speed, short-term traders could use machine learning and other technologies to infer when informed investors are trading. -
The Term Structures of Loss and Gain Uncertainty
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 two components—loss uncertainty and gain uncertainty. We then use these components to evaluate investment. -
A Simple Method for Extracting the Probability of Default from American Put Option Prices
A put option is a financial contract that gives the holder the right to sell an asset at a specific price by (or at) a specific date. A put option can therefore provide its holder insurance against a large drop in the stock price. This makes the prices of put options an ideal source of information for a market-based measure of the probability of a firm’s default. -
Learning, Equilibrium Trend, Cycle, and Spread in Bond Yields
This equilibrium model explains the trend in long-term yields and business-cycle movements in short-term yields and yield spreads. The less-frequent inverted yield curves (and less-frequent recessions) after the 1990s are due to recent secular stagnation and procyclical inflation expectations. -
Interest Rate Uncertainty as a Policy Tool
We study a novel policy tool—interest rate uncertainty—that can be used to discourage inefficient capital inflows and to adjust the composition of external account between shortterm securities and foreign direct investment (FDI).