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360 Results

The Positive Case for a CBDC

Staff Discussion Paper 2021-11 Andrew Usher, Edona Reshidi, Francisco Rivadeneyra, Scott Hendry
We discuss the competition and innovation arguments for issuing a central bank digital currency (CBDC). A CBDC could be an effective competition policy tool for payments. A CBDC could also support the vibrancy of the digital economy. It could help solve market failures and foster competition and innovation in new digital payments markets.

Sequencing Extended Monetary Policies at the Effective Lower Bound

In this analysis, we use simulations in the Bank of Canada’s projection model—the Terms-of-Trade Economic Model—to consider a suite of extended monetary policies to support the economy following the COVID-19 crisis.

The Side Effects of Safe Asset Creation

Staff Working Paper 2021-34 Sushant Acharya, Keshav Dogra
The secular decline in real interest rates has created a challenge for monetary policy, now confronting the zero lower bound more often. An increase in the supply of safe assets reduces downward pressure on the natural interest rate. This allows monetary policy to reach price stability and full employment, but not without cost—permanently lower investment.
Content Type(s): Staff research, Staff working papers Topic(s): Fiscal policy, Monetary policy implementation JEL Code(s): E, E3, E4, E5, G, G1, H, H6

An Optimal Macroprudential Policy Mix for Segmented Credit Markets

Staff Working Paper 2021-31 Jelena Zivanovic
How can macroprudential policy and monetary policy stabilize segmented credit markets? Is there a trade-off between financial stability and price stability? I use a theoretical model to evaluate the performance of alternative policies and find the optimal mix of macroprudential and monetary policy in response to aggregate shocks.

ToTEM III: The Bank of Canada’s Main DSGE Model for Projection and Policy Analysis

ToTEM III is the most recent generation of the Bank of Canada’s main dynamic stochastic general equilibrium model for projection and policy analysis. The model helps Bank staff tell clear and coherent stories about the Canadian economy’s current state and future evolution.

Monetary Policy, Trends in Real Interest Rates and Depressed Demand

Staff Working Paper 2021-27 Paul Beaudry, Césaire Meh
Over the last few decades, real interest rates have trended downward. The most common explanation is that this reflects depressed demand due to demographic, technological and other real factors. We explore the claim that these trends may have been amplified by certain features of monetary policy.

Can regulating bank capital help prevent and mitigate financial downturns?

Staff Analytical Note 2021-12 Alejandro García, Josef Schroth
Countercyclical capital buffers are regulatory measures developed in response to the global financial crisis of 2008–09. This note focuses on how time-varying capital buffers can improve financial stability in Canada

An Exploration of First Nations Reserves and Access to Cash

Staff Discussion Paper 2021-8 Heng Chen, Walter Engert, Kim Huynh, Daneal O’Habib
Adequate cash distribution is one the Bank of Canada’s core interests. Canadians’ ability to access cash influences the Bank’s thinking on issuing a central bank digital currency. We provide a perspective on these issues by exploring access of First Nations reserves to cash.

Optimal Monetary and Macroprudential Policies

Staff Working Paper 2021-21 Josef Schroth
Macroprudential policy should aim for bank balance sheets that are larger and safer during normal times but smaller and riskier during financial crises. During recoveries from financial crises, monetary policy should complement macroprudential policy by being less expansive than what would be required to close the labour gap.

Behaviour in the Canadian large-value payment system: COVID-19 vs. the global financial crisis

Staff Analytical Note 2021-7 Alexander Chaudhry, Anneke Kosse, Karen Sondergard
Unlike the 2008–09 global financial crisis, the onset of the COVID-19 crisis did not raise stress levels in Canada’s Large Value Transfer System. Swift changes to the Bank of Canada’s collateral policy and its large-scale asset purchase programs likely eased liquidity pressures in the system.