Is the stock market pricing in a V‑shaped recovery? Staff Analytical Note 2020-17 James Kyeong Major stock indexes have bounced back from their March 23 trough to about 10 percent below their peaks. However, stocks that are more sensitive to the business cycle have not performed as well during this market rally. This suggests that stock markets are pricing in a slower, shallower economic recovery. Content Type(s): Staff research, Staff analytical notes Topic(s): Asset pricing, Financial markets JEL Code(s): E, E4, E44, G, G1, G12, G14
The potential effect of a central bank digital currency on deposit funding in Canada Staff Analytical Note 2020-15 Alejandro García, Bena Lands, Xuezhi Liu, Joshua Slive A retail central bank digital currency denominated in Canadian dollars could, in theory, create competition for bank deposit funding. Content Type(s): Staff research, Staff analytical notes Topic(s): Digital currencies and fintech, Financial institutions, Financial stability JEL Code(s): E, E4, E41, E44, E5, G, G1, G10, G17, G2, G21, G3, G32, O
COVID-19 and bond market liquidity: alert, isolation and recovery Staff Analytical Note 2020-14 Jean-Sébastien Fontaine, Hayden Ford, Adrian Walton The disruption due to COVID-19 reverberated through the bond markets in three phases. In the first phase, dealers met the rising demand for liquidity. In the second, dealers reduced the supply of liquidity, and trading conditions worsened significantly. Finally, the market returned to relative stability following several interventions by the Bank of Canada. Content Type(s): Staff research, Staff analytical notes Topic(s): Coronavirus disease (COVID-19), Financial markets, Monetary policy JEL Code(s): E, E4
Cash and COVID-19: The impact of the pandemic on demand for and use of cash Staff Discussion Paper 2020-6 Heng Chen, Walter Engert, Kim Huynh, Gradon Nicholls, Mitchell Nicholson, Julia Zhu Consumer spending declined significantly during the recent COVID-19 pandemic. This negative shock likely reduced spending across all methods of payment (cash, debit, credit, etc.). The mix of payment methods consumers use could also be affected. We study how the pandemic has influenced the demand for and use of cash. We also offer insights into the use of other payment methods, such as debit and credit cards. Content Type(s): Staff research, Staff discussion papers Topic(s): Bank notes, Central bank research, Coronavirus disease (COVID-19), Digital currencies and fintech, Econometric and statistical methods JEL Code(s): C, C1, C12, C9, E, E4, O, O5, O54
Monetary Policy Implementation and Payment System Modernization Staff Working Paper 2020-26 Jonathan Witmer Canada plans to adopt a retail payment system to allow Canadians to pay in real time (or near real time) 24 hours a day, 7 days a week. However, the traditional model for setting the overnight interest rate does not operate 24/7. Content Type(s): Staff research, Staff working papers Topic(s): Monetary policy implementation, Payment clearing and settlement systems JEL Code(s): E, E4, E40, E42, E43
CBDC adoption and usage: some insights from field and laboratory experiments Staff Analytical Note 2020-12 Janet Hua Jiang This note discusses insights from historical launches of new payment methods and related laboratory experiments on the potential adoption and use of a central bank digital currency in the Canadian context. Content Type(s): Staff research, Staff analytical notes Topic(s): Central bank research, Digital currencies and fintech JEL Code(s): C, C9, E, E4, E5, E58
Security of a CBDC Staff Analytical Note 2020-11 Cyrus Minwalla Security is an important element in ensuring public confidence in a central bank digital currency (CBDC). This note highlights the required security properties of a CBDC system and the challenges encountered with existing solutions, should the Bank of Canada choose to issue one. Content Type(s): Staff research, Staff analytical notes Topic(s): Central bank research, Digital currencies and fintech JEL Code(s): E, E4, E42, E5, E51, O, O3, O31
Designing a CBDC for universal access Staff Analytical Note 2020-10 John Miedema, Cyrus Minwalla, Martine Warren, Dinesh Shah If the Bank of Canada issues a central bank digital currency, the technology should be designed for universal access. Content Type(s): Staff research, Staff analytical notes Topic(s): Central bank research, Digital currencies and fintech JEL Code(s): E, E4, E41, O, O3, O31
Privacy in CBDC technology Staff Analytical Note 2020-9 Sriram Darbha, Rakesh Arora Privacy is a key aspect of a potential central bank digital currency system. We outline different technical choices to enact various privacy models while complying with the appropriate regulations. We develop a framework to evaluate privacy models and list key risks and trade-offs in privacy design. Content Type(s): Staff research, Staff analytical notes Topic(s): Central bank research, Digital currencies and fintech JEL Code(s): E, E4, E42, E5, E51, O, O3
Monetary Policy Independence and the Strength of the Global Financial Cycle Staff Working Paper 2020-25 Christian Friedrich, Pierre Guérin, Danilo Leiva-Leon We propose a new strength measure of the global financial cycle by estimating a regime-switching factor model on cross-border equity flows for 61 countries. We then assess how the strength of the global financial cycle affects monetary policy independence, which is defined as the response of central banks' policy interest rates to exogenous changes in inflation. Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Exchange rate regimes, Financial system regulation and policies, International financial markets, Monetary policy JEL Code(s): E, E4, E5, F, F3, F32, F4, F42, G, G1, G15, G18