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359 Results

Estimating the Appropriate Quantity of Settlement Balances in a Floor System

Staff Discussion Paper 2023-26 Narayan Bulusu, Matthew McNeely, Kaetlynd McRae, Jonathan Witmer
This paper presents two complementary approaches to estimating the appropriate quantity of settlement balances needed to effectively operate monetary policy under a floor system in Canada.

Three things we learned about the Lynx payment system

Staff Analytical Note 2023-14 Nikil Chande, Zhentong Lu, Hiru Rodrigo, Phoebe Tian
Canada transitioned to a new wholesale payment system, Lynx, in August 2021. Lynx is based on a real-time settlement model that eliminates credit risk in the system. This model can require more liquidity; however, Lynx’s design allows Canada’s wholesale payments to settle efficiently.

Intermediary Market Power and Capital Constraints

Staff Working Paper 2023-51 Jason Allen, Milena Wittwer
We examine how intermediary capitalization affects asset prices in a framework that allows for intermediary market power. We introduce a model in which capital-constrained intermediaries buy or trade an asset in an imperfectly competitive market, and we show that weaker capital constraints lead to both higher prices and intermediary markups.

Anonymous Credentials: Secret-Free and Quantum-Safe

Staff Working Paper 2023-50 Raza Ali Kazmi, Cyrus Minwalla
An anonymous credential mechanism is a set of protocols that allows users to obtain credentials from an organization and demonstrate ownership of these credentials without compromising users’ privacy. In this work, we construct the first secret-free and quantum-safe credential mechanism.

Understanding DeFi Through the Lens of a Production-Network Model

Staff Working Paper 2023-42 Jonathan Chiu, Thorsten Koeppl, Hanna Yu, Shengxing Zhang
We develop a production-network model to capture how decentralized finance (DeFi) has evolved across different sectors of financial services. The model allows us to measure the value added by different DeFi sectors and to study how the connections across the sectors influence token prices.

Do hedge funds support liquidity in the Government of Canada bond market?

Staff Analytical Note 2023-11 Jabir Sandhu, Rishi Vala
While Government of Canada bond transactions of hedge funds are typically in the opposite direction to those of other market participants, during the peak period of market turmoil in March 2020, hedge funds sold these bonds, just as other market participants did. This shows that hedge funds can at times contribute to one-sided markets and amplify declines in market liquidity.

Monetary Policy Transmission, Bank Market Power, and Wholesale Funding Reliance

Staff Working Paper 2023-35 Amina Enkhbold
I study how banking market concentration and reliance on wholesale funding affect monetary policy transmission to mortgage rates. I find that this transmission is imperfect and dampens the response of consumption, output, and housing prices.

Privacy-Preserving Post-Quantum Credentials for Digital Payments

Staff Working Paper 2023-33 Raza Ali Kazmi, Duc-Phong Le, Cyrus Minwalla
Digital payments and decentralized systems enable the creation of new financial products and services for users. One core challenge in digital payments is the need to protect users from fraud and abuse while retaining privacy in individual transactions. We propose a pseudonymous credential scheme for use in payment systems to tackle this problem.

Crowdfunding and Risk

Staff Working Paper 2023-28 David Cimon
Crowdfunding may enable unique products to reach the consumer market. I model a crowdfunding technology that publicly screens consumer demand early in the production process. In this model, entrepreneurs like crowdfunding for risky projects where demand is uncertain, but not for large, safe projects or for projects where production costs are uncertain.

How Banks Create Gridlock to Save Liquidity in Canada's Large Value Payment System

Staff Working Paper 2023-26 Rodney J. Garratt, Zhentong Lu, Phoebe Tian
We show how participants in Canada’s new high-value payment system save liquidity by exploiting the new gridlock resolution arrangement. The findings have important implications for the design of these systems and shed light on financial institutions’ liquidity preference.
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