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391 Results

Introducing the Bank of Canada’s Market Participants Survey

Staff Analytical Note 2023-1 Annick Demers, Tamara Gomes, Stephane Gignac
The Market Participants Survey (MPS) gathers financial market participants’ expectations for key macroeconomic and financial variables and for monetary policy. This staff analytical note describes the MPS’s objectives and main features, its process and design, and how Bank of Canada staff use the results.

Simulating Intraday Transactions in the Canadian Retail Batch System

Staff Working Paper 2023-1 Nellie Zhang
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.

Financial Constraints and Corporate Investment in China

Staff Discussion Paper 2022-22 Kun Mo, Michel Soudan
Financial constraints deter firms from pursuing optimal investment plans. In China, we find privately owned firms face greater financial constraints than state-owned enterprises (SOEs). This can be explained by our finding that lenders appear less concerned about the credit risk of SOEs, which causes distortions in the allocation of credit.
Content Type(s): Staff research, Staff discussion papers Topic(s): Financial markets, Firm dynamics JEL Code(s): E, E2, E22, G, G1, G3

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.

Regulatory Requirements of Banks and Arbitrage in the Post-Crisis Federal Funds Market

Staff Working Paper 2022-48 Rodney J. Garratt, Sofia Priazhkina
This paper explains the nature of interest rates in the U.S. federal funds market after the 2007-09 financial crisis. We build a model of the over-the-counter lending market that incorporates new aspects of the financial system: abundance of liquidity, different regulatory standards for banks, and arbitrage opportunities created by limited access to the facility granting interest on excess reserves.

Stablecoins and Their Risks to Financial Stability

Staff Discussion Paper 2022-20 Cameron MacDonald, Laura Zhao
What risks could stablecoins pose to the financial system? We argue that the stabilization mechanisms of stablecoins give rise to the risk of confidence runs, which can propagate to broader cryptoasset markets and the traditional financial sector. We also argue that stablecoins can contribute to financial stability risks by facilitating the buildup of leverage and liquidity mismatch in decentralized finance. Such risks cannot be addressed by ensuring the price stability of stablecoins alone. Finally, we explore the potential implications of stablecoins for the current system of bank-intermediated credit and for monetary policy.

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?

Fixed-income dealing and central bank interventions

Staff Analytical Note 2022-9 David Cimon, Adrian Walton
We summarize the theoretical model of central bank asset purchases developed in Cimon and Walton (2022). The model helps us understand how asset purchases ease pressures on investment dealers to restore market conditions in a crisis.

Potential netting benefits from expanded central clearing in Canada’s fixed-income market

We assess whether more central clearing would enhance the resilience of Canadian fixed-income markets. Our analysis estimates the potential benefits of balance sheet netting under scenarios where central clearing is expanded to new participants.

Settlement Balances Deconstructed

Because of the COVID-19 pandemic, public interest in the Bank’s balance sheet and, more specifically, the size of settlement balances, has grown. This paper deconstructs the concept of settlement balances and provides some context on their history, current state and possible future evolution.
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