Publications

• November 17, 2011

  Bank of Canada Review - Autumn 2011

  

  This issue features four articles that present research and analysis by Bank staff. The first focuses on reforming the international monetary system; the second on the role of collateral and haircut policy in central bank lending; and the third on the extraction of information from the Business Outlook Survey using principal-component analysis. The fourth reviews studies that model the counterfeiting of bank notes.

  Content Type(s): Publications, Bank of Canada Review
• November 17, 2011

  Liquidity Provision and Collateral Haircuts in Payments Systems

  Bank of Canada Review - Autumn 2011 James Chapman, Jonathan Chiu, Miguel Molico

  Central banks play a pivotal role in well-functioning payments systems by providing liquidity via collateralized lending. This article discusses the role of collateral and haircut policy in central bank lending, as well as the distinguishing features of the central bank’s policy relative to private sector practices. It presents a model that explicitly incorporates the unique role of central banks in the payments system and argues that central banks must consider how their haircut policies affect the relative price and liquidity of assets, the market’s asset allocation, and the likelihood of participants to default. Furthermore, under extraordinary circumstances, there is a rationale for the central bank to temporarily reduce haircuts or broaden the list of eligible collateral to mitigate the shortage of liquidity in the market.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Central bank research, Financial stability, Payment clearing and settlement systems
• November 17, 2011

  Extracting Information from the Business Outlook Survey: A Principal-Component Approach

  Bank of Canada Review - Autumn 2011 Lise Pichette, Lori Rennison

  This article reviews recent work that uses principal-component analysis to extract information common to indicators from the Bank of Canada’s Business Outlook Survey (BOS). The authors use correlation analysis and an out-of-sample forecasting exercise to assess and compare the information content of the principal component with that of responses to key individual survey questions on growth in real gross domestic product and in real business investment. Results suggest that summarizing the common movements among BOS indicators may provide useful information for forecasting near-term growth in business investment. For growth in real gross domestic product, however, the survey’s balance of opinion on future sales growth appears to be more informative.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Business fluctuations and cycles, Regional economic developments
• November 17, 2011

  Modelling the Counterfeiting of Bank Notes: A Literature Review

  Bank of Canada Review - Autumn 2011 Ben Fung, Enchuan Shao

  The objective of this article is to improve our understanding of counterfeiting and its policy implications by reviewing research in this area. There has been almost no empirical work on counterfeiting because of the limited availability of counterfeiting data and related statistics. The authors therefore focus on theoretical studies that directly model the behaviour of the relevant economic agents. They first establish some stylized facts about counterfeiting to provide a general understanding of the problem. They then briefly review several models of counterfeiting and summarize their relevant insights, focusing on the implications of the findings for the incentive to counterfeit, social welfare and anti-counterfeiting policies. The authors find that the policy implications of these studies support the Bank’s comprehensive anti-counterfeiting strategy.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Bank notes
• October 26, 2011

  Monetary Policy Report – October 2011

  

  The Bank projects that the economy will expand by 2.1 per cent in 2011, 1.9 per cent in 2012 and 2.9 per cent in 2013. Total CPI inflation is expected to trough around 1 per cent by the middle of 2012.

  Content Type(s): Publications, Monetary Policy Report
• October 17, 2011

  Senior Loan Officer Survey - Third-Quarter 2011

  The survey results point to an overall easing in business-lending conditions during the third quarter of 2011. The balance of opinion of both the price and non-price aspects of business lending eased during the quarter.

  Content Type(s): Publications, Senior Loan Officer Survey
• October 17, 2011

  Business Outlook Survey - Autumn 2011

  Responses to the autumn survey point to less optimism among firms than in the summer survey. Indicators of future business activity, capacity constraints and price pressures have all moved down from the levels recorded in the previous survey.

  Content Type(s): Publications, Business Outlook Survey
• August 24, 2011

  Quarterly Financial Report - Second Quarter 2011

  Quarterly Financial Report - Second Quarter, 2011 - For the period ended 30 June 2011

  Content Type(s): Publications, Quarterly Financial Report
• August 18, 2011

  Bank of Canada Review - Summer 2011

  

  This special issue, “Real-Financial Linkages,” examines the Bank’s research using theoretical and empirical models to improve its understanding of the linkages between financial and macroeconomic developments in the wake of the recent global financial crisis.

  Content Type(s): Publications, Bank of Canada Review
• August 18, 2011

  Introducing Multiple Interest rates in ToTEM

  Bank of Canada Review - Summer 2011 José Dorich, Rhys R. Mendes, Yang Zhang

  This article describes changes to the structure of ToTEM—the Bank of Canada’s main model for projection and policy analysis—that allow an independent role for long-term interest rates, as well as for the risk spreads that lead to differences in the interest rates faced by households, firms and the government. These changes broaden the range of policy questions that the model can address and improve its ability to explain data. The authors use the model to simulate the effects of shocks to the risk spreads on interest rates similar to those that occurred during the recent financial crisis. They also use the model to assess the macroeconomic impact of higher requirements for bank capital and liquidity.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Economic models, Financial system regulation and policies, Interest rates