Bank of Canada Review - Spring 2015

May 14, 2015
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In this issue, Bank researchers discuss inflation dynamics and global trade following the 2007–09 financial crisis. Other articles explore changes to the governance and regulation of the Canadian payments system and outline the banking services provided by the Bank of Canada. Finally, the results of the 2013 Methods-of-Payment Survey are presented.

The Bank of Canada Review is published twice a year. Articles undergo a thorough review process. The views expressed in the articles are those of the authors and do not necessarily reflect the views of the Bank.

The contents of the Review may be reproduced or quoted, provided that the authors and the publication, with its date, are specifically cited as the source.

 
Content Type(s): Publications, Bank of Canada Review
May 14, 2015

Inflation Dynamics in the Post-Crisis Period

Bank of Canada Review - Spring 2015 Christian Friedrich, Marc-André Gosselin
Inflation rates in advanced economies experienced two consecutive puzzles during the period following the global financial crisis—unexpectedly high inflation from the end of 2009 to 2011 and unexpectedly low inflation from 2012 to the middle of 2014. We investigate these developments in two ways. First, we show that accounting for inflation expectations by households explains a significant share of the inflation puzzles at the international level. Second, we find that, for Canada, elevated competition in the retail sector is also important for understanding inflation dynamics in the post-crisis period.
Content Type(s): Publications, Bank of Canada Review articles Topic(s): Inflation and prices, International topics, Regional economic developments JEL Code(s): E, E3, E31, E5, F, F4, F41
May 14, 2015

The Slowdown in Global Trade

Bank of Canada Review - Spring 2015 Michael Francis, Louis Morel
Global trade growth has been weak during the period following the 2007–09 financial crisis. This is an important development for Canada, given the Canadian economy's high degree of openness to trade. This article investigates some of the factors behind the slowdown in global trade and finds that the weakness of global demand and its changing composition, increased protectionism and diminishing incentives to expand trade have all played a role. Some of these factors are likely to have only a temporary effect on trade growth, but others could be more long-lasting.
Content Type(s): Publications, Bank of Canada Review articles Topic(s): International topics, Recent economic and financial developments JEL Code(s): F, F1, F4, F6
May 14, 2015

Improving the Foundation of Canada’s Payments System

Bank of Canada Review - Spring 2015 Lana Embree, Paul Miller
The Canadian payments environment has evolved with enhancements in technology, changes in user expectations and new regulatory standards. In response, the existing regulatory framework and core payments infrastructure are being enhanced. This article describes several revisions to the governance and regulation of the payments system as well as plans to update the core payments infrastructure. These initiatives will position the Canadian payments system to more effectively support a modern and vibrant economy by serving the payments needs of Canadians safely and efficiently as the payments industry continues to evolve.
Content Type(s): Publications, Bank of Canada Review articles Topic(s): Financial system regulation and policies, Payment clearing and settlement systems JEL Code(s): E, E4, E42, G, G2, G28
May 14, 2015

The “Bank” at the Bank of Canada

Bank of Canada Review - Spring 2015 Thérèse Couture, Christian Bélisle
In this article, we describe the various types of banking services (payments, settlement and safekeeping) that the Bank of Canada provides to different types of clients (the Government of Canada, financial market infrastructures, financial institutions, foreign central banks and the Canada Deposit Insurance Corporation). We also explain the reasons the Bank provides these services and how this role supports its core mandates, in particular financial stability. Finally, we explore the factors driving the growth and evolution in the provision of these banking services.
Content Type(s): Publications, Bank of Canada Review articles Topic(s): Financial services, Foreign reserves management, Payment clearing and settlement systems JEL Code(s): E, E5, E50, G, G2, G20
May 14, 2015

The Use of Cash in Canada

Bank of Canada Review - Spring 2015 Ben Fung, Kim Huynh, Gerald Stuber
The Bank of Canada’s 2013 Methods-of-Payment Survey indicates that the share of cash in the overall number of retail transactions has continued to decrease, mainly because of increased use of contactless credit cards. The share of cash in the total value of retail transactions was virtually unchanged from 2009 to 2013. In particular, the value share of cash transactions above $50 increased. Automated banking machines (ABMs), still the major source of cash for Canadians, were used less often in 2013 than in 2009. Cash use in Canada is broadly similar to that in Australia and the United States.
Content Type(s): Publications, Bank of Canada Review articles Topic(s): Bank notes, Digital currencies and fintech, Econometric and statistical methods, Financial system regulation and policies, Payment clearing and settlement systems JEL Code(s): C, C8, C83, E, E4, E42, G, G2, G21, L, L8, L81