Central bank research

• Classical Decomposition of Markowitz Portfolio Selection

  Staff Working Paper 2020-21 Christopher Demone, Olivia Di Matteo, Barbara Collignon

  In this study, we enhance Markowitz portfolio selection with graph theory for the analysis of two portfolios composed of either EU or US assets. Using a threshold-based decomposition of their respective covariance matrices, we perturb the level of risk in each portfolio and build the corresponding sets of graphs.

  Content Type(s): Staff research, Staff working papers Topic(s): Central bank research JEL Code(s): C, C0, C02

• Canadian Financial Stress and Macroeconomic Conditions

  Staff Discussion Paper 2020-4 Thibaut Duprey

  Severe disruptions in the financial markets, as observed during the 2008 global financial crisis or the COVID-19 pandemic, can impair the stability of the entire financial system and worsen macroeconomic downturns.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Central bank research, Coronavirus disease (COVID-19), Financial markets, Financial stability, Monetary and financial indicators JEL Code(s): C, C3, C32, E, E4, E44, G, G0, G01

• Technology Approach for a CBDC

  Staff Analytical Note 2020-6 Dinesh Shah, Rakesh Arora, Han Du, Sriram Darbha, John Miedema, Cyrus Minwalla

  In this note, we highlight a range of technical options and considerations in designing a contingent system for a central bank digital currency (CBDC) in Canada and explore how these options achieve stated public policy goals.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Central bank research, Digital currencies and fintech JEL Code(s): E, E4, E42, E5, E51, O, O3, O31
• January 30, 2020

  How vulnerabilities like debt can affect interest rates

  Speech summary Paul Beaudry Laval University Québec, Québec

  Deputy Governor Paul Beaudry explains to students at Laval University why financial vulnerabilities—such as household debt—are important for the Bank of Canada when it sets interest rates.

  Content Type(s): Press, Speeches and appearances, Speech summaries Topic(s): Central bank research, Credit risk management, Financial stability, Inflation targets, Interest rates, Monetary policy, Monetary policy framework, Monetary policy implementation
• January 30, 2020

  Monetary Policy and Financial Vulnerabilities

  Remarks Paul Beaudry Université Laval Québec, Québec

  Deputy Governor Paul Beaudry discusses how financial vulnerabilities present a challenge for monetary policy.

  Content Type(s): Press, Speeches and appearances, Remarks Topic(s): Central bank research, Credit risk management, Financial stability, Inflation targets, Interest rates, Monetary policy, Monetary policy framework, Monetary policy implementation

• Managing GDP Tail Risk

  Staff Working Paper 2020-3 Thibaut Duprey, Alexander Ueberfeldt

  Models for macroeconomic forecasts do not usually take into account the risk of a crisis—that is, a sudden large decline in gross domestic product (GDP). However, policy-makers worry about such GDP tail risk because of its large social and economic costs.

  Content Type(s): Staff research, Staff working papers Topic(s): Central bank research, Economic models, Financial stability, Financial system regulation and policies, Interest rates, Monetary policy, Monetary policy framework JEL Code(s): D, D8, E, E4, E44, E5, E52, E58, G, G0, G01

• Social Learning and Monetary Policy at the Effective Lower Bound

  Staff Working Paper 2020-2 Jasmina Arifovic, Alex Grimaud, Isabelle Salle, Gauthier Vermandel

  This research develops a model in which the economy is directly influenced by how pessimistic or optimistic economic agents are about the future. The agents may hold different views and update them as new economic data become available.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Central bank research, Credibility, Economic models, Monetary policy, Monetary policy communications JEL Code(s): C, C8, C82, E, E3, E32, E5, E52