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190 Results

Potential benefits and key risks of fiat-referenced cryptoassets

Staff Analytical Note 2022-20 Hugh Ding, Natasha Khan, Bena Lands, Cameron MacDonald, Laura Zhao
Cryptoassets that reference a national currency (commonly known as stablecoins) aim to peg their value to the reference currency and typically use a reserve of traditional financial assets to maintain the peg. The market value of these fiat-referenced cryptoassets has grown more than thirtyfold between early 2020 and mid-2022. We explore some of their potential benefits and key risks.

Variable-rate mortgages with fixed payments: Examining trigger rates

Staff Analytical Note 2022-19 Stephen Murchison, Maria teNyenhuis
We estimate the share of variable-rate mortgages with fixed payments that reached the so-called trigger rate—the interest rate at which mortgage payments no longer cover the principal. Amid rising interest rates, this share was close to 50% at the end of October 2022 and could potentially reach 65% in 2023.

Canada’s Beveridge curve and the outlook for the labour market

Staff Analytical Note 2022-18 Alexander Lam
Canada’s labour market is tight but beginning to ease. Unemployment will likely rise in turn, but the economy can avoid a recessionary surge given current conditions. Higher unemployment would nonetheless be material, especially for those directly impacted.

Core inflation over the COVID-19 pandemic

Staff Analytical Note 2022-17 Mikael Khan, Elyse Sullivan
We assess the usefulness of various measures of core inflation over the COVID-19 pandemic. We find that Cpi-trim and CPI-median provided the best signal of underlying inflation. The favourable performance of these measures stems from their lack of reliance on historical experience, an especially valuable feature in unprecedented times.

Considerations for the allocation of non-default losses by financial market infrastructures

Staff Analytical Note 2022-16 Daniele Costanzo, Radoslav Raykov
Non-default losses of financial market infrastructures (FMIs) have gained attention due to their potential impacts on FMIs and FMI participants, and the lack of a common approach to address them. A key question is, who should absorb these losses?

Examining recent revisions to CPI-common

Staff Analytical Note 2022-15 Elyse Sullivan
Unusually large revisions to CPI-common in recent months stem from increased common movements across consumer price index components amid broad inflationary pressures. With recent revisions, CPI-common is more closely aligned with the Bank of Canada’s other two preferred measures of core inflation. However, caution is necessary when interpreting real-time estimates of CPI-common in the current environment.

Archetypes for a retail CBDC

Staff Analytical Note 2022-14 Sriram Darbha
A variety of technology designs could support retail central bank digital currency (CBDC) systems. We develop five archetypes of CBDC systems, outline their characteristics and discuss their trade-offs. This work serves as a framework to analyze and compare different designs, independent of vendor, platform and implementation.

Harnessing the benefit of state-contingent forward guidance

Staff Analytical Note 2022-13 Vivian Chu, Yang Zhang
A low level of the neutral rate of interest increases the likelihood that a central bank’s policy rate will reach its effective lower bound (ELB) in future economic downturns. In a low neutral rate environment, using an extended monetary policy toolkit including forward guidance helps address the ELB challenge. Using the Bank’s Terms-of-Trade Economic Model, we assess the benefits and limitations of a state-contingent forward guidance implemented within a flexible inflation targeting framework.

How does the Bank of Canada’s balance sheet impact the banking system?

Staff Analytical Note 2022-12 Daniel Bolduc, Brad Howell, Grahame Johnson
We examine how changes in the Bank of Canada’s balance sheet impact the banking system. Quantitative easing contributed to an increase in the size of the banking system’s balance sheet and an improvement in bank liquidity coverage ratios. Quantitative tightening is expected to partially reverse these impacts. The banking system will have to adjust its liquidity management strategy in response.

BoC–BoE Sovereign Default Database: What’s new in 2022?

Staff Analytical Note 2022-11 David Beers, Elliot Jones, Karim McDaniels, Zacharie Quiviger
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.
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