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We investigate the economic forces behind the secular decline in bond yields. Before the anchoring of inflation in the mid-1990s, nominal shocks drove inflation, output and bond yields. Afterward, the impacts of nominal shocks were much less significant.

How do banks adjust their loan rate markup in response to macroeconomic shocks?

Using Bank Note Distribution System data on the demand for cash up to September 2020, we find that demand was strong. This is true even though cash use for payments declined early in the pandemic. When mobility restrictions and lockdown measures were eased, cash use for payments increased sharply but remained less popular than electronic methods of payment.

One year later, we review the events that took place in Canadian fixed-income markets at the beginning of the COVID-19 crisis and propose potential policy research questions for future work.

Although credit cards are more expensive for merchants to accept than cash or debit cards, merchants typically pass through their costs evenly to all customers. Along with consumer card rewards and banking fees, this creates cross-subsidies between payment methods. Because higher-income individuals tend to use credit cards more than those with lower incomes, our results indicate that these cross-subsidies might lead to regressive distributional effects.

We demonstrate the ability of reinforcement learning techniques to estimate the best-response functions of banks participating in high-value payments systems—a real-world strategic game of incomplete information.

Digital currencies store balances in anonymous electronic addresses. This paper analyzes the trade-offs between the safety and convenience of aggregating balances in addresses, electronic wallets and banks.

We study how different monetary policies affect the yield curve and interact. Our study highlights the importance of the spillover structure across the yield curve for policy-making.

We use retail payment data in conjunction with machine learning techniques to predict the effects of COVID-19 on the Canadian economy in near-real time. Our model yields a significant increase in macroeconomic prediction accuracy over a linear benchmark model.

When lenders cannot directly identify behavioural and rational borrowers, they use type scoring to track the likelihood of a borrower’s type. This leads to the partial pooling of borrowers, which results in rational borrowers subsidizing borrowing costs for behavioural borrowers. This, in turn, reduces the effectiveness of regulatory policies that target mistakes by behavioural borrowers.