Understanding the Cash Demand Puzzle Staff Working Paper 2014-22 Janet Hua Jiang, Enchuan Shao We develop a model to explain a puzzling trend in cash demand in recent years: the value of bank notes in circulation as a percentage of GDP has remained stable despite decreasing cash usage at points of sale owing to competition from alternative means of payment such as credit cards. Content Type(s): Staff research, Staff working papers Research Topic(s): Bank notes, Credit and credit aggregates, Digital currencies and fintech JEL Code(s): E, E4, E41, E5, E51
Monetary Policy Transmission during Financial Crises: An Empirical Analysis Staff Working Paper 2014-21 Tatjana Dahlhaus This paper studies the effects of a monetary policy expansion in the United States during times of high financial stress. The analysis is carried out by introducing a smooth transition factor model where the transition between states (“normal” and high financial stress) depends on a financial conditions index. Content Type(s): Staff research, Staff working papers Research Topic(s): Econometric and statistical methods, Financial markets, Monetary policy transmission JEL Code(s): C, C1, C11, C3, C32, E, E3, E32, E4, E44, G, G0, G01
Consumer Cash Usage: A Cross-Country Comparison with Payment Diary Survey Data Staff Working Paper 2014-20 John Bagnall, David Bounie, Kim Huynh, Anneke Kosse, Tobias Schmidt, Scott Schuh, Helmut Stix We measure consumers’ use of cash by harmonizing payment diary surveys from seven countries. The seven diary surveys were conducted in 2009 (Canada), 2010 (Australia), 2011 (Austria, France, Germany and the Netherlands), and 2012 (the United States). Content Type(s): Staff research, Staff working papers Research Topic(s): Bank notes, Digital currencies and fintech, Econometric and statistical methods, Financial services JEL Code(s): D, D1, D12, E, E4, E41, E5, E58
May 13, 2014 Understanding Platform-Based Digital Currencies Bank of Canada Review - Spring 2014 Ben Fung, Hanna Halaburda Given technological advances and the widespread use of the Internet, various digital currencies have emerged. In most cases, Internet platforms such as Facebook and Amazon restrict the functionality of their digital currencies to enhance the business model and maximize their profits. While platform-based digital currencies could increase the efficiency of retail payments, they could also raise some important policy issues if they were to become widely used outside of the platform. Thus, it is important to closely monitor the evolution of these digital currencies. Content Type(s): Publications, Bank of Canada Review articles Research Topic(s): Bank notes, Digital currencies and fintech, Financial services, Payment clearing and settlement systems JEL Code(s): E, E4, E41, E42
E-Money: Efficiency, Stability and Optimal Policy Staff Working Paper 2014-16 Jonathan Chiu, Tsz-Nga Wong What makes e-money more special than cash? Is the introduction of e-money necessarily welfare enhancing? Is an e-money system necessarily stable? What is the optimal way to design an efficient and stable e-money scheme? Content Type(s): Staff research, Staff working papers Research Topic(s): Bank notes, Digital currencies and fintech, Payment clearing and settlement systems JEL Code(s): E, E4, E42, E5, E58, L, L5, L51
The Efficiency of Private E-Money-Like Systems: The U.S. Experience with State Bank Notes Staff Working Paper 2014-15 Warren E. Weber In the United States prior to 1863 each bank issued its own distinct notes. E-money shares many of the characteristics of these bank notes. This paper describes some lessons relevant to e-money from the U.S. experience with state bank notes. Content Type(s): Staff research, Staff working papers Research Topic(s): Bank notes, Digital currencies and fintech, Financial services JEL Code(s): E, E4, E41, E42, E5, E58
Electronic Money and Payments: Recent Developments and Issues Staff Discussion Paper 2014-2 Ben Fung, Miguel Molico, Gerald Stuber The authors review recent developments in retail payments in Canada and elsewhere, with a focus on e-money products, and assess their potential public policy implications. Content Type(s): Staff research, Staff discussion papers Research Topic(s): Bank notes, Digital currencies and fintech, Financial services, Payment clearing and settlement systems JEL Code(s): E, E4, E41, E42
Bond Risk Premia and Gaussian Term Structure Models Staff Working Paper 2014-13 Bruno Feunou, Jean-Sébastien Fontaine Cochrane and Piazzesi (2005) show that (i) lagged forward rates improve the predictability of annual bond returns, adding to current forward rates, and that (ii) a Markovian model for monthly forward rates cannot generate the pattern of predictability in annual returns. Content Type(s): Staff research, Staff working papers Research Topic(s): Asset pricing, Interest rates JEL Code(s): E, E4, E43, E47, G, G1, G12
Banks’ Financial Distress, Lending Supply and Consumption Expenditure Staff Working Paper 2014-7 H. Evren Damar, Reint Gropp, Adi Mordel The paper employs a unique identification strategy that links survey data on household consumption expenditure to bank-level data in order to estimate the effects of bank financial distress on consumer credit and consumption expenditures. Content Type(s): Staff research, Staff working papers Research Topic(s): Credit and credit aggregates, Domestic demand and components, Financial institutions JEL Code(s): E, E2, E21, E4, E44, G, G0, G01, G2, G21
A Policy Model to Analyze Macroprudential Regulations and Monetary Policy Staff Working Paper 2014-6 Sami Alpanda, Gino Cateau, Césaire Meh We construct a small-open-economy, New Keynesian dynamic stochastic general-equilibrium model with real-financial linkages to analyze the effects of financial shocks and macroprudential policies on the Canadian economy. Our model has four key features. Content Type(s): Staff research, Staff working papers Research Topic(s): Economic models, Financial system regulation and policies JEL Code(s): E, E1, E17, E3, E32, E4, E44, F, F4, F41