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We review the nascent but fast-growing literature on central bank digital currencies (CBDCs), focusing on their potential impacts on private banks. We evaluate these impacts in three areas of traditional banking: payments, lending and liquidity and maturity transformation. We also take a broader look at CBDCs and highlight two promising directions for future research.

Can Bitcoin survive? Some say it will become vulnerable to attacks as the rewards for processing Bitcoin transactions continue to decline. The economics of fixed costs suggest the specialized hardware used to mine Bitcoin may be key to its survival.

The results of our 2017 Bitcoin Omnibus Survey (December 12 to 15, 2017) when compared with those from 2016 show that Bitcoin “awareness” increased from 64 to 85 per cent, while ownership increased from 2.9 to 5.0 per cent. Most Bitcoin purchasers are using the cryptocurrency as an investment and not as a means of payment for goods or services.

This article describes the Bank of Canada’s version of the Global Economy Model structured to incorporate an active banking system that features an interbank market and cross-border lending. After describing the new model, the authors use it to examine the responses of selected U.S. and Canadian macroeconomic variables to a “credit crunch” in the United States and also to study the impact of changes in the regulatory limits to bank leverage in Canada. They also discuss the relative merits of a monetary policy framework based on inflation targeting and one based on price-level targeting in the presence of shocks to the U.S. and Canadian banking sectors.

There are indications that business dynamism has declined in advanced economies. In particular, firm entry and exit rates have fallen, suggesting that the creative destruction process has lost some of its vitality. Meanwhile, productivity growth has slowed. Some believe that lower entry and exit rates partly explain the weaker productivity growth.

This paper outlines and assesses the various channels through which digitalization can affect prices of goods and services.

The five articles in this issue present research and analysis by Bank staff covering a variety of topics: the growth of Canadian-dollar-denominated assets in official foreign reserves; the emergence of platform-based digital currencies; methods of forecasting the real price of oil; measures of uncertainty in monetary policy; and the recent performance of the labour market in Canada and the United States.

Our paper employs smartphone data to construct an improved cash access metric by accounting for both spatial agglomeration and households’ travel patterns. We find that incorporating trip-chaining into the travel metric could show that travel costs are from 15 to 25% less than not incorporating trip-chaining and that the biggest decrease is driven by rural residents.

We develop high-frequency, news-based indicators using natural language processing methods to analyze news media texts. Our indicators track both supply (raw, intermediate and final goods) and labour shortages over time. They also provide weekly time-varying topic narratives about various types of shortages.

This issue features a summary of the Bank’s annual conference, which took place in November 2011 and dealt with payments systems, and two articles that present research by Bank staff on global current account imbalances and macrofinancial risk assessment. The fourth article in this issue reviews the recent experience with inflation targeting.