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This paper examines the interaction between quantitative easing (QE) and the securities lending facility (SLF) using a detailed dataset on Riksbank QE purchases, Swedish DMO SLF transactions and OTC repo deals. A theoretical model further shows how excess demand for assets and search frictions shift the SLF from a backstop to a first-resort tool.

The use of bank notes in Canada for payments has declined consistently for some time, and similar trends are evident in other countries. This has led some observers to predict a cashless society in the future.

Using micro data from the U.S. Consumer Expenditure Survey and Current Population Survey, I document that government spending shocks affect individuals differently over the life cycle.

Indeed, the global financial crisis of the past two years has presented unique, stressful challenges that have forced us all to assess what has worked well and what needs to change. Today, I would like to review some of the critical thinking around these issues, primarily from the perspective of our work at the Bank of Canada.

We demonstrate the ability of reinforcement learning techniques to estimate the best-response functions of banks participating in high-value payments systems—a real-world strategic game of incomplete information.

We study how the transmission of monetary policy innovations is affected by the endogenous response of the central bank to macroeconomic aggregates in a two-agent New Keynesian model. We focus on how the stance of monetary policy and the fraction of savers in the economy affect transmission.

Non-default losses of financial market infrastructures (FMIs) have gained attention due to their potential impacts on FMIs and FMI participants, and the lack of a common approach to address them. A key question is, who should absorb these losses?

The most extreme events, such as economic crises, are rare but often have a great impact. It is difficult to precisely determine the likelihood of such events because the sample is small.

Uncertainty surrounding the Bank of Canada’s future policy rates is measured using implied volatility computed from interest rate options and realized volatility computed from intraday prices of interest rate futures. Both volatility measures show that uncertainty decreased following major policy actions taken by the Bank in response to the 2007–09 financial crisis. Findings also indicate that, on average, uncertainty decreases following the Bank’s policy rate announcements.

This paper studies the testable implication of players’ collusive or cooperative behaviour in a binary choice game with complete information. I illustrate the implementation of this test by revisiting the entry game between Walmart and Kmart.