Central bank research

• November 17, 2011

  Liquidity Provision and Collateral Haircuts in Payments Systems

  Bank of Canada Review - Autumn 2011 James Chapman, Jonathan Chiu, Miguel Molico

  Central banks play a pivotal role in well-functioning payments systems by providing liquidity via collateralized lending. This article discusses the role of collateral and haircut policy in central bank lending, as well as the distinguishing features of the central bank’s policy relative to private sector practices. It presents a model that explicitly incorporates the unique role of central banks in the payments system and argues that central banks must consider how their haircut policies affect the relative price and liquidity of assets, the market’s asset allocation, and the likelihood of participants to default. Furthermore, under extraordinary circumstances, there is a rationale for the central bank to temporarily reduce haircuts or broaden the list of eligible collateral to mitigate the shortage of liquidity in the market.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Central bank research, Financial stability, Payment clearing and settlement systems
• May 19, 2011

  Unconventional Monetary Policy: The International Experience with Central Bank Asset Purchases

  Bank of Canada Review - Spring 2011 Sharon Kozicki, Lena Suchanek, Eric Santor

  As part of their policy response to the financial crisis of 2007–09, central banks introduced numerous unprecedented monetary policy measures to provide monetary easing. This article defines and documents these measures, focusing on central bank asset purchases and their impact on central bank balance sheets. It then discusses the challenges of identifying the effects of these measures and explores possible exit strategies. The potential costs of these policies are also analyzed, as well as the broader implications for monetary policy frameworks.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Central bank research, Financial markets, International topics, Monetary policy framework
• February 17, 2011

  Payment Networks: A Review of Recent Research

  Bank of Canada Review - Winter 2010-2011 James Chapman, Lana Embree, Tom Roberts, Nellie Zhang

  In this article, the authors review work done at the Bank of Canada and at other central banks with the relatively new application of network analysis to the study of payments systems.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Central bank research, Payment clearing and settlement systems
• February 17, 2011

  Conference Summary: Financial Globalization and Financial Instability

  Bank of Canada Review - Winter 2010-2011 Scott Hendry

  The Bank of Canada’s annual conference, held in October 2010, brought together leading researchers from universities and central banks around the world.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Central bank research, Financial markets, Financial stability, Financial system regulation and policies