In 2009, the Bank of Canada set its effective lower bound (ELB) at 25 basis points (bps). Given the recent experience of Sweden, Denmark, Switzerland and the euro area with negative interest rates, we examine the economics of negative interest rates and suggest that cash storage costs are the source of a negative lower bound on interest rates.
This article provides an analysis of some recent banking regulatory initiatives that are likely to influence the activities of financial intermediaries and the effectiveness of central bank monetary policy implementation frameworks. Although the effects of individual regulations can be anticipated in most cases, the combined regulatory impact is not yet clear. Central banks should, however, be able to accommodate the effects of the emerging regulatory environment within their existing policy implementation frameworks.
This paper discusses reputational risk in the context of central banking and explains why it matters to central banks. It begins with a general discussion of reputational risk within the broader framework of risk management.
Forward guidance is one of the policy tools that a central bank can implement if it seeks to provide additional monetary stimulus when it is operating at the effective lower bound (ELB) on interest rates. It became more widely used during and after the global financial crisis.
Governor Poloz discusses the recent rise in financial market volatility and low long-term borrowing costs, and what they both mean for central bank credibility.
This paper studies how banks simultaneously manage the two sides of their balance sheet and its implications for bank risk taking and real economic activity. First, we analyze how changes in funding affect the supply of bank loans.