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2121 Results

Heterogeneity and Monetary Policy: A Thematic Review

The theory that rich economic diversity of businesses and households both affects and is shaped by economy-wide fluctuations has strong implications for monetary policy. This review places these insights in a Canadian context.
December 14, 2007

The Costs of Inflation in New Keynesian Models

Ambler describes three new channels through which inflation affects economic welfare in New Keynesian models. These channels were absent from traditional analyses and may have caused researchers to underestimate the costs associated with variable inflation, even at relatively low levels of inflation. The article concludes with a preliminary assessment of the quantitative importance of the new channels and their significance for monetary policy.

Does US or Canadian Macro News Drive Canadian Bond Yields?

Staff analytical note 2018-38 Bruno Feunou, Rodrigo Sekkel, Morvan Nongni-Donfack
We show that a large share of low-frequency (quarterly) movements in Canadian government bond yields can be explained by macroeconomic news, even though high-frequency (daily) changes are driven by other shocks. Furthermore, we show that US macro news—not domestic news— explains most of the quarterly variation in Canadian bond yields.

On the Value of Virtual Currencies

Staff working paper 2016-42 Wilko Bolt, Maarten van Oordt
This paper develops an economic framework to analyze the exchange rate of virtual currency. Three components are important: first, the current use of virtual currency to make payments; second, the decision of forward-looking investors to buy virtual currency (thereby effectively regulating its supply); and third, the elements that jointly drive future consumer adoption and merchant acceptance of virtual currency.

Blockchain-Based Settlement for Asset Trading

Staff working paper 2018-45 Jonathan Chiu, Thorsten Koeppl
Can securities be settled on a blockchain and, if so, what are the gains relative to existing settlement systems? We consider a blockchain that ensures delivery versus payment by linking transfers of assets with payments and operates using a proof-of-work protocol. The main benefit of a blockchain is faster and more flexible settlement, whereas the challenge is to avoid settlement fails when participants fork the chain to get rid of trading losses.
November 15, 2012

Access, Competition and Risk in Centrally Cleared Markets

Central counterparties can make over-the-counter markets more resilient and reduce systemic risk by mitigating and managing counterparty credit risk. These benefits are maximized when access to central counterparties is available to a wide range of market participants. In an over-the-counter market, there is an important trade-off between risk and competition. A model of an over-the-counter market shows how risk and competition could be influenced by the incentives of market participants as they move to central clearing. In a centrally cleared market, there may be less risk when participation is high. This helps to explain why regulators have put in place requirements for fair, open and risk-based access criteria.

Content Type(s): Publications, Bank of Canada Review articles JEL Code(s): G, G1, G18, G2, G21, L, L1, L13

Evaluating the Effects of Forward Guidance and Large-scale Asset Purchases

Staff working paper 2021-54 Xu Zhang
I propose a novel method to identify and estimate the macroeconomic effects of forward guidance and large-scale asset purchases (LSAP) for each FOMC announcement. I find that LSAP is more important than forward guidance in influencing output and inflation. LSAP puts upward pressure on short-term yields, so it should always be used in conjunction with forward guidance.
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