Bank of Canada Review - Autumn 2017

November 16, 2017
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Is shale oil production in the United States a factor in the 2014 oil price decline? Which methods of payment are commonly accepted by merchants in Canada? Bank researchers share their insights on these topics. They also provide an update on the neutral rate of interest as well as on changes to the Bank’s operational framework for market operations.

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
November 16, 2017

Factors Behind the 2014 Oil Price Decline

Bank of Canada Review - Autumn 2017 Reinhard Ellwanger, Benjamin Sawatzky, Konrad Zmitrowicz
Oil prices have declined sharply over the past three years. While both supply and demand factors played a role in the large oil price decline of 2014, global supply growth seems to have been the predominant force. The most important drivers were likely the surprising growth of US shale oil production, the output decisions of the Organization of the Petro-leum Exporting Countries and the weaker-than-expected global growth that followed the 2009 global financial crisis.
Content Type(s): Publications, Bank of Canada Review articles Topic(s): Business fluctuations and cycles, International topics, Recent economic and financial developments JEL Code(s): Q, Q4, Q41, Q43
November 16, 2017

Acceptance and Use of Payments at the Point of Sale in Canada

Bank of Canada Review - Autumn 2017 Ben Fung, Kim Huynh, Anneke Kosse
Merchants universally accept cash. Consumers widely hold cash but also carry debit and credit cards. The cost of using a method of payment has only a small influence on which method consumers use. Large merchants accept all payments, while only two-thirds of small and medium-sized businesses accept credit cards. Merchants report that credit cards are the costliest payment method compared with cash and debit cards. However, costs are not the only consideration. Merchant acceptance of credit accounts for the many con-sumers that want to use credit cards. This interaction between consumers and merchants is known as network externalities.
Content Type(s): Publications, Bank of Canada Review articles Topic(s): Bank notes, Digital currencies and fintech, Financial institutions, Payment clearing and settlement systems JEL Code(s): D, D2, D23, D24, E, E4, E41, E42, G, G2, G21, L, L2
November 16, 2017

An Update on the Neutral Rate of Interest

Bank of Canada Review - Autumn 2017 José Dorich, Abeer Reza, Subrata Sarker
The neutral rate serves as a benchmark for measuring monetary stimulus and provides a medium- to long-run anchor for the real policy rate. Global neutral rate estimates have been falling over the past few decades. Factors such as population aging, high corporate savings, and low trend productivity growth are likely to continue supporting a low global neutral rate. These global factors as well as domestic factors are exerting downward pres-sure on the Canadian real neutral rate, which is estimated to be between 0.5 to 1.5 per cent. This low neutral rate has important implications for monetary policy and financial stability.
Content Type(s): Publications, Bank of Canada Review articles Topic(s): Interest rates, International topics, Potential output, Recent economic and financial developments JEL Code(s): E, E4, E43, E5, E52, E58, F, F0, F01, F4, F43, O, O4
November 16, 2017

An Initial Assessment of Changes to the Bank of Canada’s Framework for Market Operations

Bank of Canada Review - Autumn 2017 Kaetlynd McRae, Sean Durr, David Manzo
The Bank of Canada made changes to several of the tools that make up its framework for operations and liquidity provision. These changes came about after a comprehensive re-view of the framework and are designed to help the Bank better achieve its objectives of reinforcing the target for the overnight rate and supporting the well-functioning of Cana-dian financial markets under normal market conditions.
Content Type(s): Publications, Bank of Canada Review articles Topic(s): Financial markets, Financial stability, Monetary policy framework, Monetary policy implementation, Monetary policy transmission, Payment clearing and settlement systems JEL Code(s): E, E4, E42, E44, E5, E52, E58, G, G0, G01, G1, G18