Central Bank Digital Currencies and Banking: Literature Review and New Questions Staff Discussion Paper 2023-4 James Chapman, Jonathan Chiu, Mohammad Davoodalhosseini, Janet Hua Jiang, Francisco Rivadeneyra, Yu Zhu We review the nascent but fast-growing literature on central bank digital currencies (CBDCs), focusing on their potential impacts on private banks. We evaluate these impacts in three areas of traditional banking: payments, lending and liquidity and maturity transformation. We also take a broader look at CBDCs and highlight two promising directions for future research. Content Type(s): Staff research, Staff discussion papers Research Topic(s): Central bank research, Digital currencies and fintech, Financial institutions, Financial stability JEL Code(s): E, E5, E50, E58, G, G0, G00, L, L0, L00
CANVAS: A Canadian Behavioral Agent-Based Model Staff Working Paper 2022-51 Cars Hommes, Mario He, Sebastian Poledna, Melissa Siqueira, Yang Zhang The Bank of Canada’s current suite of models faces challenges in addressing network effects that integrate household and firm-level heterogeneity and their behaviours. We develop CANVAS, a Canadian behavioural agent-based model to contribute to the Bank’s next-generation modelling effort. CANVAS improves forecasting performance and expands capacity for model-based scenario analysis. Content Type(s): Staff research, Staff working papers Research Topic(s): Central bank research, Econometric and statistical methods, Economic models, Firm dynamics, Inflation and prices JEL Code(s): C, D, D2, D22, D8, D83, E, E1, E17
Understanding Post-COVID Inflation Dynamics Staff Working Paper 2022-50 Martin Harding, Jesper Lindé, Mathias Trabandt We propose a macroeconomic model with a nonlinear Phillips curve that has a flat slope when inflationary pressures are subdued and steepens when inflationary pressures are elevated. Our model can generate more sizable inflation surges due to cost-push and demand shocks than a standard linearized model when inflation is high. Content Type(s): Staff research, Staff working papers Research Topic(s): Business fluctuations and cycles, Central bank research, Coronavirus disease (COVID-19), Economic models, Inflation and prices, Inflation: costs and benefits, Monetary policy, Monetary policy implementation JEL Code(s): E, E3, E30, E31, E32, E37, E4, E44, E5, E52
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. Content Type(s): Staff research, Staff working papers Research Topic(s): Central bank research, Economic models, Financial institutions, Financial markets, Financial stability, Financial system regulation and policies, Wholesale funding JEL Code(s): E, E4, E42, E5, E58, G, G2, G28
Canada’s Beveridge curve and the outlook for the labour market Staff Analytical Note 2022-18 Alexander Lam Canada’s labour market is tight but beginning to ease. Unemployment will likely rise in turn, but the economy can avoid a recessionary surge given current conditions. Higher unemployment would nonetheless be material, especially for those directly impacted. Content Type(s): Staff research, Staff analytical notes Research Topic(s): Business fluctuations and cycles, Central bank research, Labour markets, Recent economic and financial developments JEL Code(s): E, E3, E32, J, J2, J20, J6, J63, J64
November 10, 2022 Getting back to stable prices and a balanced jobs market Speech summary Tiff Macklem Public Policy Forum Toronto, Ontario Governor Tiff Macklem discusses the relationship between inflation and employment and how the Bank of Canada is working to cool an overheated economy. Content Type(s): Press, Speeches and appearances, Speech summaries Research Topic(s): Central bank research, Coronavirus disease (COVID-19), Domestic demand and components, Expectations, Inflation and prices, Interest rates, Labour markets, Monetary policy, Monetary policy framework, Potential output, Price stability, Productivity, Recent economic and financial developments
November 10, 2022 Restoring labour market balance and price stability Remarks Tiff Macklem Public Policy Forum Toronto, Ontario Governor Tiff Macklem outlines the link between high inflation and tight labour markets. He explains how the Bank is working to rebalance the labour market and discusses how structural changes may influence the supply of workers in Canada. Content Type(s): Press, Speeches and appearances, Remarks Research Topic(s): Central bank research, Coronavirus disease (COVID-19), Domestic demand and components, Expectations, Inflation and prices, Interest rates, Labour markets, Monetary policy, Monetary policy framework, Potential output, Price stability, Productivity, Recent economic and financial developments
October 6, 2022 What’s happening to inflation and why it matters Remarks Tiff Macklem Halifax Chamber of Commerce Halifax, Nova Scotia Governor Tiff Macklem discusses how inflation has evolved in recent months and explains what the Bank is watching as it takes action to return inflation to target. Content Type(s): Press, Speeches and appearances, Remarks Research Topic(s): Central bank research, Coronavirus disease (COVID-19), Domestic demand and components, Expectations, Inflation and prices, Inflation: costs and benefits, Interest rates, Labour markets, Monetary policy, Monetary policy and uncertainty, Price stability, Recent economic and financial developments, Service sector
October 6, 2022 Restoring price stability for all Canadians Speech summary Tiff Macklem Halifax Chamber of Commerce Halifax, Nova Scotia Governor Tiff Macklem explains how inflation in Canada reflects more and more what’s happening with domestic demand and what the Bank is watching as it works to bring inflation back to the 2% target. Content Type(s): Press, Speeches and appearances, Speech summaries Research Topic(s): Central bank research, Coronavirus disease (COVID-19), Domestic demand and components, Expectations, Inflation and prices, Inflation: costs and benefits, Interest rates, Labour markets, Monetary policy, Monetary policy and uncertainty, Price stability, Recent economic and financial developments, Service sector
Archetypes for a retail CBDC Staff Analytical Note 2022-14 Sriram Darbha A variety of technology designs could support retail central bank digital currency (CBDC) systems. We develop five archetypes of CBDC systems, outline their characteristics and discuss their trade-offs. This work serves as a framework to analyze and compare different designs, independent of vendor, platform and implementation. Content Type(s): Staff research, Staff analytical notes Research Topic(s): Central bank research, Digital currencies and fintech JEL Code(s): E, E4, E42, E5, E51, O, O3