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636 Results

The Financial Origins of Non-fundamental Risk

Staff Working Paper 2022-4 Sushant Acharya, Keshav Dogra, Sanjay Singh
We explore the idea that the financial sector can be a source of non-fundamental risk to the rest of the economy. We also consider whether policy can be used to reduce this risk—either by increasing the supply of publicly backed safe assets or by reducing the demand for safe assets.

Assessing Climate-Related Financial Risk: Guide to Implementation of Methods

A pilot project on climate transition scenarios by the Bank of Canada and the Office of the Superintendent of Financial Institutions assessed climate-related credit and market risks. This report describes the project’s methodologies and provides guidance on implementing them.

News-Driven International Credit Cycles

Staff Working Paper 2021-66 Galip Kemal Ozhan
This paper examines the implications of positive news about future asset values that turn out to be incorrect at a later date in an open economy model with banking. The model captures the patterns of bank credit and current account dynamics in Spain between 2000 and 2010. The model finds that the use of unconventional policies leads to a milder bust.

Quantifying the Economic Benefits of Payments Modernization: the Case of the Large-Value Payment System

Staff Working Paper 2021-64 Neville Arjani, Fuchun Li, Zhentong Lu
Canada is undertaking a major initiative to modernize its payments ecosystem. The modernized ecosystem is expected to bring significant benefits to Canadian financial markets and the overall economy. We develop an empirical framework to quantify the economic benefits of modernizing the payment system in Canada.

Monetary Policy Spillover to Small Open Economies: Is the Transmission Different under Low Interest Rates?

Does the transmission of monetary policy change when interest rates are low or negative? We shed light on this question by analyzing the international bank lending channels of monetary policy using regulatory data on banks from four small open economies: Canada, Chile, the Czech Republic and Norway.

The Countercyclical Capital Buffer and International Bank Lending: Evidence from Canada

Staff Working Paper 2021-61 David Xiao Chen, Christian Friedrich
We examine the impact of the CCyB on foreign lending activities of Canadian banks. We show that the announcement of a tightening in another country’s CCyB leads to a decrease in the growth rate of cross-border lending between Canadian banks and borrowers in that other country.

Discount Rates, Debt Maturity, and the Fiscal Theory

Staff Working Paper 2021-58 Alexandre Corhay, Thilo Kind, Howard Kung, Gonzalo Morales
Do bond risk premiums influence the effects of debt maturity operations? Using a model with realistic bond risk premiums, we show that maturity operations have sizable effects on expected inflation and output when the central bank passively responds to inflation and the fiscal authority weakly responds to the debt level.
Content Type(s): Staff research, Staff working papers Topic(s): Fiscal policy, Interest rates, Monetary policy JEL Code(s): E, E4, E43, E44, E6, E63, G, G1, G12

Updated Methodology for Assigning Credit Ratings to Sovereigns

We update the Bank of Canada’s credit rating methodology for sovereigns, including our approach to assessing their fiscal position and monetary policy flexibility. We also explicitly consider climate-related factors.
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