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 JEL Code(s): D, D4, G, G1, G12, G2, G21, G29 Research Theme(s): Financial markets and funds management, Market functioning, Financial system, Financial stability and systemic risk, Money and payments, Payment and financial market infrastructures
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 JEL Code(s): R, R2, R21, R23, R3, R32 Research Theme(s): Financial system, Household and business credit, Monetary policy, Real economy and forecasting
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 JEL Code(s): E, E2, E22, E4, E44 Research Theme(s): Financial markets and funds management, Market functioning, Financial system, Household and business credit, Models and tools, Economic models, Monetary policy, Monetary policy framework and transmission
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 JEL Code(s): C, C1, C12, E, E4, O, O3, O33, O5, O51 Research Theme(s): Models and tools, Econometric, statistical and computational methods, Money and payments, Cash and bank notes, Digital assets and fintech
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 JEL Code(s): E, E5, E58, E59, E6, G, G0, G01 Research Theme(s): Monetary policy, Monetary policy tools and implementation, Money and payments, Payment and financial market infrastructures
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 JEL Code(s): F, F3, F31, F33, F4, F41 Research Theme(s): Financial markets and funds management, Funds management, International markets and currencies, Models and tools, Economic models
May 31, 2022 Research Update - May 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
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 JEL Code(s): E, E2, E27, E3, E37, E4, E44, G, G1, G2, G21, G23 Research Theme(s): Financial system, Financial institutions and intermediation, Financial stability and systemic risk
Financial Intermediaries and the Macroeconomy: Evidence from a High-Frequency Identification Staff working paper 2022-24 Pablo Ottonello, Wenting Song We provide empirical evidence of effects to the aggregate economy from surprises about financial intermediaries’ net worth based on a high-frequency identification strategy. We estimate that news of a 1% decline in intermediaries’ net worth leads to a 0.2%–0.4% decrease in the market value of nonfinancial firms. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E3, E32, E4, E44, E5, E51, G, G0, G01, G1, G12, G2, G21, G23, G24, G3, G32 Research Theme(s): Financial markets and funds management, Market functioning, Financial system, Financial institutions and intermediation, Household and business credit, Monetary policy, Real economy and forecasting
Transmission of Cyber Risk Through the Canadian Wholesale Payment System Staff working paper 2022-23 Anneke Kosse, Zhentong Lu This paper studies how the impact of a cyber attack that paralyzes one or multiple banks' ability to send payments would transmit to other banks through the Canadian wholesale payment system. Based on historical payment data, we simulate a wide range of scenarios and evaluate the total payment disruption in the system. Content Type(s): Staff research, Staff working papers JEL Code(s): C, C4, C49, E, E4, E42, E47, G, G2, G21 Research Theme(s): Financial system, Financial stability and systemic risk, Money and payments, Payment and financial market infrastructures