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This paper analyzes cross-border cryptocurrency flows, focusing on Bitcoin and four major stablecoins. Using data for 162 countries, we identify the key determinants, including responses to weak economic conditions and demand for remittances. A COVID-19 case study supports these findings and emphasizes the role of cryptocurrencies in global finance.

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Depression Scrip

The examples of Depression scrip illustrated here are part of the National Currency Collection of the Bank of Canada.

We study household mortgage choice in a model with three mortgage contracts that differ in their payment structures: fixed-rate fixed-payment, variable-rate variable-payment, and a hybrid variable-rate fixed-payment mortgage where interest rate changes affect principal repayment rather than payment size. We calibrate the model to match mortgage choice patterns in Canada, where all these options are offered with short terms. We demonstrate that restricting contract choice or mandating long terms, as in the U.S. system, can lead to substantial welfare losses by limiting risk management strategies and increasing mortgage pricing ex-ante.

The Bank of Canada uses several short-term forecasting models for the monitoring of key foreign economies - the United States, the euro area, Japan and China. The design of the forecasting models used for each region is influenced by the level of detail required, as well as the timeliness and volatility of data. Forecasts from different models are typically combined to mitigate model uncertainty, and judgment is applied to the model forecasts to incorporate information that is not directly reflected in the most recent indicators.

When players repeatedly face an identical or similar game (e.g., coordination game, technology adoption game, or product choice game), they may learn through experience to perform better in the future. This learning behaviour has important economic implications.

We study the revision properties of the Bank of Canada’s staff output gap estimates since the mid-1980s. Our results suggest that the average staff output gap revision has decreased significantly over the past 15 years, in line with recent evidence for the U.S.

This paper proposes a practical approach to address the procyclicality of initial margin at central counterparties (CCPs) that can work even in periods of extreme stress. The approach allows CCPs to limit the speed of margin increases resulting from spikes in market volatility.

With increasing levels of household debt in recent years, the number of households that may be vulnerable to a negative economic shock is rising as well. Decisions made by both the debtor and the creditor can contribute to insolvency. This article presents some stylized facts about insolvency in Canada’s household sector and analyzes the role of creditors in insolvencies. The average debt of an individual filing for bankruptcy is more than 1.5 times that of an average Canadian household; bankruptcy filers tend to be unemployed or in low-wage jobs, and are typically renters. The article reports that banks that approve more loans per branch, which is interpreted as less-intensive use of soft information (such as the loan officer’s assessment of the applicant’s character), experience more client bankruptcies. This finding has important policy implications, because financial institutions that do not use soft information risk further deterioration in their lending portfolios.

Business cycles are substantially correlated across countries. Yet most existing models are not able to generate substantial transmission through international trade. We show that the nature of such transmission depends fundamentally on the features determining the responsiveness of labor supply and labor demand to international relative prices.