Balancing the Canadian Repo Market through QT: The Diminishing Role of Settlement Balances Staff analytical paper 2026-40 Evan Dudley, Jean-Sébastien Fontaine, Dimitri Hadjistavropoulos, Neil Maru, Sofia Tchamova, Andreas Uthemann, Jun Yang Repo market imbalances can be large and persistent, and can lift the cost of short-term funding in Canada, including the CORRA benchmark. Banks’ holdings of settlement balances absorbed most of the repo imbalances during QE, but have become far less central by the end of QT. Content Type(s): Staff research, Staff analytical paper JEL Code(s): E, E5, E52, E58 Research Theme(s): Financial system, Financial institutions and intermediation, Monetary policy, Monetary policy tools and implementation
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 JEL Code(s): E, E5, E50, E58 Research Theme(s): Financial system, Financial stability and systemic risk, Monetary policy, Monetary policy framework and transmission, Money and payments, Digital assets and fintech, Payment and financial market infrastructures
A Behavioral New Keynesian Model of a Small Open Economy Under Limited Foresight Staff working paper 2023-44 Seunghoon Na, Yinxi Xie This paper studies exchange rate dynamics by incorporating bounded rationality, that is, limited foresight, in a small open-economy model. This behavior of limited foresight helps explain several observations and puzzles in the data of exchange rate movements. Content Type(s): Staff research, Staff working papers JEL Code(s): E, E4, E43, E7, E70, F, F3, F31, F4, F41 Research Theme(s): Financial markets and funds management, International markets and currencies, Models and tools, Economic models, Monetary policy, Inflation dynamics and pressures, Monetary policy framework and transmission
Assessing global potential output growth: April 2025 Staff analytical note 2025-15 Samuel Boulanger, Raheeb Dastagir, Daniel de Munnik, Eshini Ekanayake, Kun Mo, Walter Muiruri, Faiza Noor, Sabreena Obaid, Louis Poirier This note presents the annual update of Bank of Canada staff estimates for growth in global potential output. These estimates served as key inputs to the analysis supporting the April 2025 Monetary Policy Report. Content Type(s): Staff research, Staff analytical notes JEL Code(s): E, E1, E2, F, F0, F1, O, O3, O33, O4 Research Theme(s): Monetary policy, Real economy and forecasting, Structural challenges, Demographics and labour supply, Digitalization and productivity, International trade, finance and competitiveness
June 11, 2015 Financial System Review - June 2015 The Reports section of the Financial System Review examines selected issues of relevance to the Canadian and global financial systems. The June 2015 issue features two reports summarizing recent work by Bank of Canada staff on specific financial sector policies. Content Type(s): Publications, Financial Stability Report
Global Trade Flows: Revisiting the Exchange Rate Elasticities Staff working paper 2017-41 Matthieu Bussière, Guillaume Gaulier, Walter Steingress This paper contributes to the debate on the magnitude of exchange rate elasticities by providing a set of price and quantity elasticities for 51 advanced and emerging-market economies. Specifically, for each of these countries we report the elasticity of trade prices and trade quantities on both the export and on the import sides, as well as the reaction of the trade balance. Content Type(s): Staff research, Staff working papers JEL Code(s): C, C5, C51, F, F1, F14, F3, F31, F33, F4, F41 Research Theme(s): Financial markets and funds management, International markets and currencies, Structural challenges, International trade, finance and competitiveness
How Oil Supply Shocks Affect the Global Economy: Evidence from Local Projections Staff discussion paper 2019-6 Olivier Gervais We provide empirical evidence on the impact of oil supply shocks on global aggregates. To do this, we first extract structural oil supply shocks from a standard oil-price determination model found in the literature. Content Type(s): Staff research, Staff discussion papers JEL Code(s): C, C2, C22, C5, E, E3, E37, Q, Q4, Q43 Research Theme(s): Monetary policy, Inflation dynamics and pressures, Real economy and forecasting, Structural challenges, International trade, finance and competitiveness
The Market for Acquiring Card Payments from Small and Medium-Sized Canadian Merchants Staff discussion paper 2020-5 Angelika Welte, Jozsef Molnar This note uses industry data and a unique dataset of small and medium-sized merchants to provide insights into the acquirer-merchant market in Canada. Content Type(s): Staff research, Staff discussion papers JEL Code(s): C, C2, D, D2, E, E4, E42 Research Theme(s): Financial markets and funds management, Market structure, Money and payments, Payment and financial market infrastructures, Retail payments
August 22, 2003 Measuring Interest Rate Expectations in Canada Bank of Canada Review - Summer 2003 Grahame Johnson Financial market expectations regarding future changes in the target for the overnight rate of interest are an important source of information for the Bank of Canada. Financial markets are the mechanism through which the policy rate affects other financial variables, such as longer-term interest rates, the exchange rate, and other asset prices. An accurate measure of their expectations can therefore help policy-makers assess the potential impact of contemplated changes. Johnson focuses on the expectations hypothesis, which measures expectations of future levels of the target overnight rate as implied by current money market yields. Although expectations can be derived from the current yield on any short-term fixed-income asset, some assets have proven to be more accurate predictors than others. The implementation of a policy of fixed-announcements dates has coincided with the increased predictive power of these short-term assets. As a result of this improvement, a relatively simple model of the yield curve can now provide an accurate measure of financial market expectations. Content Type(s): Publications, Bank of Canada Review articles
Towards a HANK Model for Canada: Estimating a Canadian Income Process Staff discussion paper 2020-13 Iskander Karibzhanov How might one simulate a million realistic income paths and compute their statistical moments in under a second? Using CUDA-based methods to estimate the Canadian earnings process, I find that the distribution of labour income growth is sharply peaked with heavy tails—similar to that in the United States. Content Type(s): Staff research, Staff discussion papers JEL Code(s): D, D3, D31, E, E2, E24, J, J3, J31 Research Theme(s): Models and tools, Economic models, Monetary policy, Real economy and forecasting