FSRC - Financial System Research Center

• Central Bank Digital Currency and Monetary Policy

  Staff Working Paper 2018-36 Mohammad Davoodalhosseini

  Many central banks are contemplating whether to issue central bank digital currency. This piece explores the implications as well as potential motivators of such a step.

  Content Type(s): Staff research, Staff working papers Topic(s): Digital currencies and fintech, Monetary policy JEL Code(s): E, E4, E42, E5, E50

• Prudential Liquidity Regulation in Banking—A Literature Review

  Staff Discussion Paper 2018-8 Adi Mordel

  Prudential liquidity requirements are a relatively recent regulatory tool on the international front, introduced as part of the Basel III accord in the form of a liquidity coverage ratio (LCR) and a net stable funding ratio (NSFR). I first discuss the rationale for regulating bank liquidity by highlighting the market failures that it addresses while reviewing key theoretical contributions to the literature on the motivation for prudential liquidity regulation.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Financial institutions, Financial system regulation and policies JEL Code(s): G, G2, G21, G28

• The Impact of Government Debt Supply on Bond Market Liquidity: An Empirical Analysis of the Canadian Market

  Staff Working Paper 2018-35 Jeffrey Gao, Jianjian Jin, Jacob Thompson

  This paper finds that Government of Canada benchmark bonds tend to be more illiquid over the subsequent month when there is a large increase in government debt supply. The result is both statistically and economically significant, stronger for the long-term than the short-term sector, and is robust when other macro factors are controlled for.

  Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Debt management, Financial markets JEL Code(s): D, D5, D53, G, G1, G12, G18, G2, G3, G32

• Incentive Compatibility on the Blockchain

  Staff Working Paper 2018-34 Jonathan Chiu, Thorsten Koeppl

  A blockchain is a digital ledger that keeps track of a record of ownership without the need for a designated party to update and enforce changes to the record. The updating of the ledger is done directly by the users of the blockchain and is traditionally governed by a proof-of-work (PoW) protocol.

  Content Type(s): Staff research, Staff working papers Topic(s): Digital currencies and fintech, Economic models, Payment clearing and settlement systems JEL Code(s): G, G2, H, H4, P, P4, P43

• Following the Money: Evidence for the Portfolio Balance Channel of Quantitative Easing

  Staff Working Paper 2018-33 Itay Goldstein, Jonathan Witmer, Jing Yang

  Recent research suggests that quantitative easing (QE) may affect a broad range of asset prices through a portfolio balance channel. Using novel security-level holding data of individual US mutual funds, we establish evidence that portfolio rebalancing occurred both within and across funds.

  Content Type(s): Staff research, Staff working papers Topic(s): Monetary policy, Monetary policy implementation, Monetary policy transmission JEL Code(s): E, E5, E58, G, G2, G23

• The Characteristics of Uninsured Mortgages and their Securitization Potential

  Staff Analytical Note 2018-24 Adi Mordel, Maria teNyenhuis

  Following changes to housing finance policies that target insured mortgages, uninsured mortgage credit has been growing. This robust growth creates a larger pool of mortgages that may be suitable for private-label residential mortgage-backed securities (RMBS).

  Content Type(s): Staff research, Staff analytical notes Topic(s): Financial institutions, Financial system regulation and policies, Wholesale funding JEL Code(s): G, G2, G21, G28

• The BoC-BoE Sovereign Default Database Revisited: What’s New in 2018?

  Staff Working Paper 2018-30 David Beers, Jamshid Mavalwalla

  Until recently, there have been few efforts to systematically measure and aggregate the nominal value of the different types of sovereign government debt in default. To help fill this gap, the Bank of Canada’s Credit Rating Assessment Group (CRAG) has developed a comprehensive database of sovereign defaults posted on the Bank of Canada’s website that now is updated in partnership with the Bank of England.

  Content Type(s): Staff research, Staff working papers Topic(s): Debt management, Development economics, Financial stability, International financial markets JEL Code(s): F, F3, F34, G, G1, G10, G14, G15

• A Look Inside the Box: Combining Aggregate and Marginal Distributions to Identify Joint Distributions

  Staff Working Paper 2018-29 Marie-Hélène Felt

  This paper proposes a method for estimating the joint distribution of two or more variables when only their marginal distributions and the distribution of their aggregates are observed. Nonparametric identification is achieved by modelling dependence using a latent common-factor structure.

  Content Type(s): Staff research, Staff working papers Topic(s): Bank notes, Digital currencies and fintech, Econometric and statistical methods JEL Code(s): C, C1, C14, D, D1, D14, E, E4, E41

• Bitcoin Awareness and Usage in Canada: An Update

  Staff Analytical Note 2018-23 Christopher Henry, Kim Huynh, Gradon Nicholls

  The results of our 2017 Bitcoin Omnibus Survey (December 12 to 15, 2017) when compared with those from 2016 show that Bitcoin “awareness” increased from 64 to 85 per cent, while ownership increased from 2.9 to 5.0 per cent. Most Bitcoin purchasers are using the cryptocurrency as an investment and not as a means of payment for goods or services.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Bank notes, Digital currencies and fintech, Econometric and statistical methods JEL Code(s): C, C1, C12, E, E4

• Redemption Runs in Canadian Corporate Bond Funds?

  Staff Analytical Note 2018-21 Rohan Arora

  Mutual funds employ a host of tools to manage redemption run risk. However, our results suggest that Canadian corporate bond funds may be vulnerable to redemption runs, especially when they are less liquid and when market volatility is high.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Financial institutions, Financial markets JEL Code(s): G, G0, G01, G2, G23