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179 Results

Digital Payments in Firm Networks: Theory of Adoption and Quantum Algorithm

We build a network formation game of firms with trade flows to study the adoption and usage of a new digital currency as an alternative to correspondent banking.

The Macroeconomic Implications of Coholding

Staff Working Paper 2024-16 Michael Boutros, Andrej Mijakovic
Coholder households simultaneously carry high-cost credit card debt and low-yield cash. We study the implications of this behavior for fiscal and monetary policy, finding that coholder households have smaller consumption responses in the short run but larger responses in the long run.

U.S. Macroeconomic News and Low-Frequency Changes in Small Open Economies’ Bond Yields

Using two complementary approaches, we investigate the importance of U.S. macroeconomic news in driving low-frequency fluctuations in the term structure of interest rates in Canada, Sweden and the United Kingdom. We find that U.S. macroeconomic news is particularly important to explain changes in the expectation components of the nominal, real and break-even inflation rates of small open economies.

Central Bank Digital Currency and Banking Choices

Staff Working Paper 2024-4 Jiaqi Li, Andrew Usher, Yu Zhu
To what extent does a central bank digital currency (CBDC) compete with bank deposits? To answer this question, we develop and estimate a structural model where each household chooses which financial institution to deposit their digital money with.

The Role of International Financial Integration in Monetary Policy Transmission

Staff Working Paper 2024-3 Jing Cynthia Wu, Yinxi Xie, Ji Zhang
We propose an open-economy New Keynesian model with financial integration that allows financial intermediaries to hold foreign long-term bonds. We study the implications of financial integration on monetary policy transmission. Among various aspects of financial integration, the bond duration plays a major role. These results hold for conventional and unconventional monetary policies.
January 15, 2024

Flood risk and residential lending

We present key findings of a recent study that evaluates the credit risk that flooding poses to the residential lending activities of Canadian banks and credit unions. Results show that such risk currently appears modest but could become larger with climate change.

Communicating Inflation Uncertainty and Household Expectations

Staff Working Paper 2023-63 Olena Kostyshyna, Luba Petersen
We examine the value of direct communication to households about inflation and the uncertainty around inflation statistics. All types of information about inflation are effective at immediately managing inflation expectations, with information about outlooks being more effective and relevant than that about recent inflation and Bank targets.

Monetary Policy and Racial Inequality in Housing Markets: A Study of 140 US Metropolitan Areas

Staff Working Paper 2023-62 Qi Li, Xu Zhang
We find that minority households see greater declines in housing returns and entries into homeownership than White households after a tightening of monetary policy. Our findings emphasize the unintended consequences of monetary policy on racial inequality in the housing market.
Content Type(s): Staff research, Staff working papers Topic(s): Central bank research, Housing, Monetary policy JEL Code(s): E, E4, E40, E5, E52, R, R0, R00

Climate-Related Flood Risk to Residential Lending Portfolios in Canada

We assess the potential financial risks of current and projected flooding caused by extreme weather events in Canada. We focus on the residential real estate secured lending (RESL) portfolios of Canadian financial institutions (FIs) because RESL portfolios are an important component of FIs’ balance sheets and because the assets used to secure such loans are immobile and susceptible to climate-related extreme weather events.

Supporting the Transition to Net-Zero Emissions: The Evolving Role of Central Banks

Staff Discussion Paper 2023-31 Karen McGuinness
While climate change was largely tackled by government policies in the past, central banks are increasingly grappling with the risks climate change poses. They are evaluating their operational policies to reflect these risks and the transition to a net-zero economy. This paper explores the trade-offs and considerations central banks face.
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