Staff research

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.

Many explanations for the decline in real interest rates over the last 30 years point to the role that population aging or rising income inequality plays in increasing the long-run aggregate demand for assets. Notwithstanding the importance of such factors, the starting point of this paper is to show that the major change driving household asset demand over this period is instead an increased desire—for a given age and income level—to hold assets.

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.

Does consumption smoothing fundamentally decrease during macroeconomic disasters? This paper uses a large historical dataset (1870–2016) for 16 industrial economies to show that during macroeconomic disasters (e.g., wars, pandemics, depressions) aggregate consumption and income are significantly less decoupled than during normal times.

This paper studies, theoretically and empirically, the unintended consequences of mandatory retention rules in securitization. It proposes a novel model showing that while retention strengthens monitoring, it may also encourage banks to shift risk.

This paper measures how both geographical and cultural proximity of bank branches affect household credit choice and pricing. For credit products that require high levels of ex-ante screening, we find that both proximities can complement each other in reducing the cost of providing soft information, thereby increasing credit access.

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.

This paper proposes a unique approach to simulate intraday transactions in the Canadian retail payments batch system when such transactions are unobtainable. The simulation procedure has potential for helping with data-deficient problems where only high-level aggregate information is available.

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.

We develop an algorithm and run it on a hybrid quantum annealing solver to find an ordering of payments that reduces the amount of system liquidity necessary without substantially increasing payment delays.