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2126 Results

November 15, 2012

Monetary Policy and the Risk-Taking Channel: Insights from the Lending Behaviour of Banks

The financial crisis of 2007-09 and the subsequent extended period of historically low real interest rates have revived the question of whether economic agents are willing to take on more risk when interest rates remain low for a prolonged time period. This increased appetite for risk, which causes economic agents to search for investment assets and strategies that generate higher investment returns, has been called the risk-taking channel of monetary policy. Recent academic research on banks suggests that lending policies in times of low interest rates can be consistent with the existence of a risk-taking channel of monetary policy in Europe, South America, the United States and Canada. Specifically, studies find that the terms of loans to risky borrowers become less stringent in periods of low interest rates. This risk-taking channel may amplify the effects of traditional transmission mechanisms, resulting in the creation of excessive credit.

Content Type(s): Publications, Bank of Canada Review articles JEL Code(s): E, E5, E58, G, G2, G21

Central Bank Digital Currency and Banking Choices

Staff working paper 2024-4 Jiaqi Li, Andrew Usher, Yu Zhu
To what extent does a central bank digital currency (CBDC) compete with bank deposits? To answer this question, we develop and estimate a structural model where each household chooses which financial institution to deposit their digital money with.
August 14, 1999

Passive Money, Active Money, and Monetary Policy

This article by the Bank's visiting economist examines the role of money in the transmission of monetary policy. Professor Laidler argues against the view of money as a passive variable that reacts to changes in prices, output, and interest rates but has no direct causative effect on them. He maintains that the empirical evidence supports the view of money playing an active role in the transmission mechanism. While he agrees that individual monetary aggregates can be difficult to read because of instabilities in the demand-for-money function, he argues that monetary aggregates, particularly those relating to transactions money, should have a more significant place in the hierarchy of policy variables that the Bank considers when formulating monetary policy.

A Policy Framework for E-Money: A Report on Bank of Canada Research

Staff discussion paper 2018-5 Mohammad Davoodalhosseini, Francisco Rivadeneyra
We present a policy framework for electronic money and payments. The framework poses a set of positive questions related to the areas of responsibility of central banks: payments systems, monetary policy and financial stability. The questions are posed to four broad forms of e-money: privately or publicly issued, and with centralized or decentralized verification of transactions. This framework is intended to help evaluate the trade-offs that central banks face in the decision to issue new forms of e-money.
November 17, 2016

Structural Reforms and Economic Growth in Emerging-Market Economies

Growth has slowed in many emerging-market economies (EMEs) since the 2007–09 global financial crisis, reflecting both cyclical and structural factors. In this context, it will be in-creasingly important for EMEs to raise potential growth by maintaining steady progress on structural reforms. How do structural reforms generally support growth? What are the re-form priorities for EMEs over recent history and today? Finally, what will be the impact of planned structural reforms on potential output growth among the world’s larger EMEs? These are some of the questions considered by the authors.
Content Type(s): Publications, Bank of Canada Review articles JEL Code(s): E, E0, E02, E6, E61, E65, O, O1, O11, O4, O41

Complementarities Between Fiscal Policy and Monetary Policy—Literature Review

This paper surveys and summarizes the literature on how fiscal policy and monetary policy can complement each other in stabilizing economic activity.

AI Paradox: Promise vs. Reality—What It Means for Monetary Policy

Staff analytical paper 2026-4 Joshua Brault, Maryam Haghighi, Jing Yang
This note reviews the emerging evidence on AI’s labour-market and productivity effects, highlighting early task-level impacts, sizable micro level productivity gains, and the macroeconomic challenges these pose for monetary policy during the transition.
February 23, 2021

Canada’s labour market: rebound, recuperation and restructuring

Remarks (delivered virtually) Tiff Macklem Edmonton Chamber of Commerce and Calgary Chamber of Commerce Calgary, Alberta, Edmonton, Alberta
Governor Tiff Macklem talks about the COVID-19 pandemic and major economic forces are affecting the labour market, and the need for all groups to benefits from the recovery.

Evaluating the portfolio balance effects of the Government of Canada Bond Purchase Program on the Canadian yield curve

Staff analytical note 2024-22 Antonio Diez de los Rios
The Bank of Canada’s Government of Canada Bond Purchase Program, launched in response to the COVID-19 pandemic, lowered the weighted average maturity of the Government of Canada’s debt by approximately 1.4 years. This in turn reduced Canadian 10-year and 5-year zero-coupon yields by 84 and 52 basis points, respectively.
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