Staff research

• Central Bank Digital Currency and Banking: Macroeconomic Benefits of a Cash-Like Design

  Staff Working Paper 2021-63 Jonathan Chiu, Mohammad Davoodalhosseini

  Should a CBDC be more like cash or bank deposits? An interest-bearing, cash-like CBDC not only makes payments more efficient but also increases total demand. This has positive effects on other transactions, inducing more deposit taking and lending and, thus, bank intermediation.

  Content Type(s): Staff research, Staff working papers Topic(s): Digital currencies and fintech, Monetary policy, Monetary policy framework JEL Code(s): E, E5, E50, E58

• Revisiting the Monetary Sovereignty Rationale for CBDCs

  Staff Discussion Paper 2021-17 Skylar Brooks

  One argument for central bank digital currencies (CBDCs) is that without them, private and foreign digital monies could displace domestic currencies, threatening the central bank’s monetary policy and lender of last resort capabilities. I revisit this monetary sovereignty rationale and offer a wider view—one that considers a broader set of currency functions and captures important cross-country variation.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Debt management, Digital currencies and fintech, Exchange rate regimes, Financial stability, Monetary policy JEL Code(s): E, E4, E41, E42, E5, E52, E58, H, H1, H12, H6, H63

• Monetary Policy Spillover to Small Open Economies: Is the Transmission Different under Low Interest Rates?

  Staff Working Paper 2021-62 Jin Cao, Valeriya Dinger, Tomás Gómez, Zuzana Gric, Martin Hodula, Alejandro Jara, Ragnar Juelsrud, Karolis Liaudinskas, Simona Malovaná, Yaz Terajima

  Does the transmission of monetary policy change when interest rates are low or negative? We shed light on this question by analyzing the international bank lending channels of monetary policy using regulatory data on banks from four small open economies: Canada, Chile, the Czech Republic and Norway.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, International topics, Monetary policy transmission JEL Code(s): E, E4, E43, E5, E52, E58, F, F3, F34, F4, F42, G, G2, G21, G28
• November 30, 2021

  Research Update - November 2021

  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

• The Countercyclical Capital Buffer and International Bank Lending: Evidence from Canada

  Staff Working Paper 2021-61 David Xiao Chen, Christian Friedrich

  We examine the impact of the CCyB on foreign lending activities of Canadian banks. We show that the announcement of a tightening in another country’s CCyB leads to a decrease in the growth rate of cross-border lending between Canadian banks and borrowers in that other country.

  Content Type(s): Staff research, Staff working papers Topic(s): Credit risk management, Financial institutions, Financial stability, Financial system regulation and policies, International topics JEL Code(s): E, E3, E32, F, F2, F21, F3, F32, G, G2, G21, G28

• Bitcoin Adoption and Beliefs in Canada

  Staff Working Paper 2021-60 Daniela Balutel, Christopher Henry, Jorge Vásquez, Marcel Voia

  Using an economic model as well as survey data from the Bank of Canada, we study what factors influence the adoption of Bitcoin in Canada.

  Content Type(s): Staff research, Staff working papers Topic(s): Digital currencies and fintech, Econometric and statistical methods, Economic models JEL Code(s): D, D8, D83, O, O3, O33

• Democratic Political Economy of Financial Regulation

  Staff Working Paper 2021-59 Igor Livshits, Youngmin Park

  We offer a theory of how inefficiently lax financial regulation could arise in a democratic society.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial stability, Financial system regulation and policies, Housing, Interest rates JEL Code(s): E, E4, E43, E44, G, G0, G01, G2, G21, G28, P, P4, P48

• Discount Rates, Debt Maturity, and the Fiscal Theory

  Staff Working Paper 2021-58 Alexandre Corhay, Thilo Kind, Howard Kung, Gonzalo Morales

  Do bond risk premiums influence the effects of debt maturity operations? Using a model with realistic bond risk premiums, we show that maturity operations have sizable effects on expected inflation and output when the central bank passively responds to inflation and the fiscal authority weakly responds to the debt level.

  Content Type(s): Staff research, Staff working papers Topic(s): Fiscal policy, Interest rates, Monetary policy JEL Code(s): E, E4, E43, E44, E6, E63, G, G1, G12

• The COVID-19 Consumption Game-Changer: Evidence from a Large-Scale Multi-Country Survey

  Staff Working Paper 2021-57 Alexander Hodbod, Cars Hommes, Stefanie J. Huber, Isabelle Salle

  A multi-country consumer survey investigates why and how much households decreased their consumption in five key sectors after pandemic-related restrictions were lifted in Europe in July 2020. Beyond infection risk and precautionary saving motives, households also reported not missing some consumption items, which may indicate preference shifts and structural changes in the post-COVID-19 economy.

  Content Type(s): Staff research, Staff working papers Topic(s): Coronavirus disease (COVID-19), Domestic demand and components, Firm dynamics, Fiscal policy, Recent economic and financial developments JEL Code(s): D, D1, D12, D8, D81, D84, E, E2, E21, E6, E60, E7, E71

• Updated Methodology for Assigning Credit Ratings to Sovereigns

  Staff Discussion Paper 2021-16 Karim McDaniels, Nico Palesch, Sanjam Suri, Zacharie Quiviger, John Walsh

  We update the Bank of Canada’s credit rating methodology for sovereigns, including our approach to assessing their fiscal position and monetary policy flexibility. We also explicitly consider climate-related factors.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Credit risk management, Foreign reserves management JEL Code(s): F, F3, F31, G, G2, G24, G28, G3, G32