Staff research

• June 30, 2022

  Research Update - June 2022

  This monthly newsletter features the latest research publications by Bank of Canada economists including external publications and working papers published on the Bank of Canada’s website.

  Content Type(s): Staff research, Research newsletters

• International Transmission of Quantitative Easing Policies: Evidence from Canada

  Staff Working Paper 2022-30 Serdar Kabaca, Kerem Tuzcuoglu

  This paper examines the cross-border spillovers from major economies’ quantitative easing (QE) policies to their trading partners. We concentrate on spillovers from the US to Canada during the zero lower bound period when QE policies were actively used.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, International topics, Monetary policy transmission JEL Code(s): E, E5, E52, F, F4, F41, F44

• Quantum Monte Carlo for Economics: Stress Testing and Macroeconomic Deep Learning

  Staff Working Paper 2022-29 Vladimir Skavysh, Sofia Priazhkina, Diego Guala, Thomas Bromley

  Using the quantum Monte Carlo algorithm, we study whether quantum computing can improve the run time of economic applications and challenges in doing so. We apply the algorithm to two models: a stress testing bank model and a DSGE model solved with deep learning. We also present innovations in the algorithm and benchmark it to classical Monte Carlo.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Central bank research, Econometric and statistical methods, Economic models, Financial stability JEL Code(s): C, C1, C15, C6, C61, C63, C68, C7, E, E1, E13, G, G1, G17, G2, G21

• Unregulated Lending, Mortgage Regulations and Monetary Policy

  Staff Working Paper 2022-28 Ugochi Emenogu, Brian Peterson

  This paper evaluates the effectiveness of macroprudential policies when regulations are uneven across mortgage lender types. We look at credit tightening that results from macroprudential regulations and examine how much of it is counteracted by credit shifting to unregulated lenders. We also study the impact of monetary policy tightening when some lenders are unregulated.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial system regulation and policies, Monetary policy transmission JEL Code(s): E, E4, E44, E5, E50, E52, E58, G, G2, G21, G23, G28

• Potential netting benefits from expanded central clearing in Canada’s fixed-income market

  Staff Analytical Note 2022-8 Jessie Ziqing Chen, Johannes Chen, Shamarthi Ghosh, Manu Pandey, Adrian Walton

  We assess whether more central clearing would enhance the resilience of Canadian fixed-income markets. Our analysis estimates the potential benefits of balance sheet netting under scenarios where central clearing is expanded to new participants.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Credit risk management, Financial institutions, Financial markets JEL Code(s): D, D4, G, G1, G12, G2, G21, G29

• Analyzing the house price boom in the suburbs of Canada’s major cities during the pandemic

  Staff Analytical Note 2022-7 Louis Morel

  We assess how location affects house prices in Canada. The gap in prices between suburbs and downtown was closing gradually before the pandemic. The gap has been closing faster since spring 2020. This finding reflects a shift in preferences toward more living space.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Asset pricing, Coronavirus disease (COVID-19), Financial stability, Housing JEL Code(s): R, R2, R21, R23, R3, R32

• Endogenous Liquidity and Capital Reallocation

  Staff Working Paper 2022-27 Wei Cui, Randall Wright, Yu Zhu

  We study economies where firms acquire capital in primary markets then retrade it in secondary markets after information on idiosyncratic productivity arrives. Our secondary markets incorporate bilateral trade with search, bargaining and liquidity frictions.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Monetary policy JEL Code(s): E, E2, E22, E4, E44

• Cash in the Pocket, Cash in the Cloud: Cash Holdings of Bitcoin Owners

  Staff Working Paper 2022-26 Daniela Balutel, Christopher Henry, Kim Huynh, Marcel Voia

  We estimate the effect that owning Bitcoin has on the amount of cash held by Canadian consumers. Our results question the view that adopting certain new technologies, such as Bitcoin, leads to a decline in cash holdings.

  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, C12, E, E4, O, O3, O33, O5, O51

• Settlement Balances Deconstructed

  Staff Discussion Paper 2022-13 Parnell Chu, Grahame Johnson, Scott Kinnear, Karen McGuinness, Matthew McNeely

  Because of the COVID-19 pandemic, public interest in the Bank’s balance sheet and, more specifically, the size of settlement balances, has grown. This paper deconstructs the concept of settlement balances and provides some context on their history, current state and possible future evolution.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Central bank research, Coronavirus disease (COVID-19), Financial markets, Monetary policy implementation JEL Code(s): E, E5, E58, E59, E6, G, G0, G01

• Foreign Exchange Interventions: The Long and the Short of It

  Staff Working Paper 2022-25 Patrick Alexander, Sami Alpanda, Serdar Kabaca

  This paper studies the effects of foreign exchange (FX) interventions in a two-region model where governments issue both short- and long-term bonds. We find that the term premium channel dominates the trade balance channel in our calibrated model. As a result, the conventional beggar-thy-neighbor effects of interventions are overturned.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Exchange rate regimes, Exchange rates, Foreign reserves management, International financial markets, International topics JEL Code(s): F, F3, F31, F33, F4, F41