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234
result(s)
Harnessing the benefit of state-contingent forward guidance
Staff Analytical Note 2022-13
Vivian Chu,
Yang Zhang
A low level of the neutral rate of interest increases the likelihood that a central bank’s policy rate will reach its effective lower bound (ELB) in future economic downturns. In a low neutral rate environment, using an extended monetary policy toolkit including forward guidance helps address the ELB challenge. Using the Bank’s Terms-of-Trade Economic Model, we assess the benefits and limitations of a state-contingent forward guidance implemented within a flexible inflation targeting framework.
Content Type(s):
Staff research,
Staff analytical notes
Topic(s):
Central bank research,
Economic models,
Monetary policy framework,
Monetary policy transmission
JEL Code(s):
E,
E2,
E27,
E3,
E37,
E4,
E5,
E52,
E58
How does the Bank of Canada’s balance sheet impact the banking system?
Staff Analytical Note 2022-12
Daniel Bolduc-Zuluaga,
Brad Howell,
Grahame Johnson
We examine how changes in the Bank of Canada’s balance sheet impact the banking system. Quantitative easing contributed to an increase in the size of the banking system’s balance sheet and an improvement in bank liquidity coverage ratios. Quantitative tightening is expected to partially reverse these impacts. The banking system will have to adjust its liquidity management strategy in response.
Content Type(s):
Staff research,
Staff analytical notes
Topic(s):
Financial institutions,
Financial stability,
Monetary policy
JEL Code(s):
E,
E5,
E51,
G,
G2,
G21,
G23,
G3,
G32
BoC–BoE Sovereign Default Database: What’s new in 2022?
Staff Analytical Note 2022-11
David Beers,
Elliot Jones,
Karim McDaniels,
Zacharie Quiviger
The BoC–BoE database of sovereign debt defaults, published and updated annually by the Bank of Canada and the Bank of England, provides comprehensive estimates of stocks of government obligations in default.
Content Type(s):
Staff research,
Staff analytical notes
Topic(s):
Debt management,
Development economics,
Financial stability,
International financial markets
JEL Code(s):
F,
F3,
F34,
G,
G1,
G10,
G14,
G15
Has wage setting changed in Canada? Evidence from the pre-pandemic 2020 Wage-Setting Survey
Staff Analytical Note 2022-10
David Amirault,
Sarah Miller,
Matthieu Verstraete
Just before the pandemic began, the Bank of Canada conducted the 2020 Wage-Setting Survey. The goal was to explore the unusual trend of subdued wage growth in 2018 and 2019 despite a tightening in the labour market. Although this wage puzzle was beginning to resolve at the time of the survey, results highlight changes in several factors that may have important impacts on wage dynamics.
Content Type(s):
Staff research,
Staff analytical notes
Topic(s):
Central bank research,
Labour markets
JEL Code(s):
J,
J3,
J31,
J32,
J33,
J6,
J63
Fixed-income dealing and central bank interventions
Staff Analytical Note 2022-9
David Cimon,
Adrian Walton
We summarize the theoretical model of central bank asset purchases developed in Cimon and Walton (2022). The model helps us understand how asset purchases ease pressures on investment dealers to restore market conditions in a crisis.
Content Type(s):
Staff research,
Staff analytical notes
Topic(s):
Coronavirus disease (COVID-19),
Economic models,
Financial institutions,
Financial markets,
Market structure and pricing
JEL Code(s):
G,
G1,
G10,
G2,
G20,
L,
L1,
L10
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
How well can large banks in Canada withstand a severe economic downturn?
Staff Analytical Note 2022-6
Andisheh (Andy) Danaee,
Harsimran Grewal,
Brad Howell,
Guillaume Ouellet Leblanc,
Xuezhi Liu,
Mayur Patel,
Xiangjin Shen
We examine the potential impacts of a severe economic shock on the resilience of major banks in Canada. We find these banks would suffer significant financial losses but nevertheless remain resilient. This underscores the role well-capitalized banks and sound underwriting practices play in supporting economic activity in a downturn.
Content Type(s):
Staff research,
Staff analytical notes
Topic(s):
Financial institutions,
Financial stability
JEL Code(s):
E,
E2,
E27,
E3,
E37,
E4,
E44,
G,
G1,
G2,
G21,
G23
Resilience of bank liquidity ratios in the presence of a central bank digital currency
Staff Analytical Note 2022-5
Alissa Gorelova,
Bena Lands,
Maria teNyenhuis
Could Canadian banks continue to meet their regulatory liquidity requirements after the introduction of a cash-like retail central bank digital currency (CBDC)? We conduct a hypothetical exercise to estimate how a CBDC could affect bank liquidity by increasing the run-off rates of transactional retail deposits under four increasingly severe scenarios.
Content Type(s):
Staff research,
Staff analytical notes
Topic(s):
Central bank research,
Digital currencies and fintech,
Econometric and statistical methods,
Financial institutions,
Financial stability
JEL Code(s):
C,
E,
E4,
G,
G2,
G21,
O,
O3,
O33