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38 Results

Should the Central Bank Issue E-money?

Staff Working Paper 2018-58 Charles M. Kahn, Francisco Rivadeneyra, Tsz-Nga Wong
Should a central bank take over the provision of e-money, a circulable electronic liability? We discuss how e-money technology changes the tradeoff between public and private provision, and the tradeoff between e-money and a central bank's existing liabilities like bank notes and reserves.

Price Selection

Staff Working Paper 2018-44 Carlos Carvalho, Oleksiy Kryvtsov
We propose a simple, model-free way to measure selection in price setting and its contribution to inflation dynamics. The proposed measure of price selection is based on the observed comovement between inflation and the average level from which adjusting prices depart.

A Policy Framework for E-Money: A Report on Bank of Canada Research

Staff Discussion Paper 2018-5 Mohammad Davoodalhosseini, Francisco Rivadeneyra
We present a policy framework for electronic money and payments. The framework poses a set of positive questions related to the areas of responsibility of central banks: payments systems, monetary policy and financial stability. The questions are posed to four broad forms of e-money: privately or publicly issued, and with centralized or decentralized verification of transactions. This framework is intended to help evaluate the trade-offs that central banks face in the decision to issue new forms of e-money.

Credit Crunches from Occasionally Binding Bank Borrowing Constraints

Staff Working Paper 2017-57 Tom D. Holden, Paul Levine, Jonathan Swarbrick
We present a model in which banks and other financial intermediaries face both occasionally binding borrowing constraints and costs of equity issuance. Near the steady state, these intermediaries can raise equity finance at no cost through retained earnings.

Aggregate Fluctuations and the Role of Trade Credit

Staff Working Paper 2017-37 Lin Shao
In an economy where production takes place in multiple stages and is subject to financial frictions, how firms finance intermediate inputs matters for aggregate outcomes. This paper focuses on trade credit—the lending and borrowing of input goods between firms—and quantifies its aggregate impacts during the Great Recession.

Terms-of-Trade and House Price Fluctuations: A Cross-Country Study

Staff Working Paper 2017-1 Paul Corrigan
Terms-of-trade shocks are known to be key drivers of business cycles in open economies. This paper argues that terms-of-trade shocks were also important for house price fluctuations in a panel of developed countries over the 1994–2015 period.
Content Type(s): Staff research, Staff working papers Topic(s): Financial stability, Housing, International topics JEL Code(s): C, C3, C32, E, E3, E32, E5, E51, F, F3, F36, F4, F41

On the Value of Virtual Currencies

Staff Working Paper 2016-42 Wilko Bolt, Maarten van Oordt
This paper develops an economic framework to analyze the exchange rate of virtual currency. Three components are important: first, the current use of virtual currency to make payments; second, the decision of forward-looking investors to buy virtual currency (thereby effectively regulating its supply); and third, the elements that jointly drive future consumer adoption and merchant acceptance of virtual currency.

On the Nexus of Monetary Policy and Financial Stability: Effectiveness of Macroprudential Tools in Building Resilience and Mitigating Financial Imbalances

Staff Discussion Paper 2016-11 H. Evren Damar, Miguel Molico
This paper reviews the Canadian and international evidence of the effectiveness of macroprudential policy measures in building resilience and mitigating financial imbalances. The analysis concludes that these measures have broadly achieved their goal of increasing the overall resilience of the financial system to the buildup of imbalances and increasing the financial system’s ability to withstand adverse shocks.
December 15, 2015

Indebted Households and Potential Vulnerabilities for the Canadian Financial System: A Microdata Analysis

Over the past decade, an increasing proportion of households in Canada have become highly indebted relative to their income. These highly indebted households now hold one-fifth of total Canadian household debt.Simulations suggest that this greater degree of household indebtedness could exacerbate the impact of shocks to income and interest rates relative to the pre-crisis period. However, an assessment of the vulnerability of the Canadian financial system should, among other factors, account for the ability of Canadian financial institutions to withstand losses from the household sector.

Understanding the Cash Demand Puzzle

Staff Working Paper 2014-22 Janet Hua Jiang, Enchuan Shao
We develop a model to explain a puzzling trend in cash demand in recent years: the value of bank notes in circulation as a percentage of GDP has remained stable despite decreasing cash usage at points of sale owing to competition from alternative means of payment such as credit cards.
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