May 14, 2015 Improving the Foundation of Canada’s Payments System Bank of Canada Review - Spring 2015 Lana Embree, Paul Miller The Canadian payments environment has evolved with enhancements in technology, changes in user expectations and new regulatory standards. In response, the existing regulatory framework and core payments infrastructure are being enhanced. This article describes several revisions to the governance and regulation of the payments system as well as plans to update the core payments infrastructure. These initiatives will position the Canadian payments system to more effectively support a modern and vibrant economy by serving the payments needs of Canadians safely and efficiently as the payments industry continues to evolve. Content Type(s): Publications, Bank of Canada Review articles Topic(s): Financial system regulation and policies, Payment clearing and settlement systems JEL Code(s): E, E4, E42, G, G2, G28
May 14, 2015 The “Bank” at the Bank of Canada Bank of Canada Review - Spring 2015 Thérèse Couture, Christian Bélisle In this article, we describe the various types of banking services (payments, settlement and safekeeping) that the Bank of Canada provides to different types of clients (the Government of Canada, financial market infrastructures, financial institutions, foreign central banks and the Canada Deposit Insurance Corporation). We also explain the reasons the Bank provides these services and how this role supports its core mandates, in particular financial stability. Finally, we explore the factors driving the growth and evolution in the provision of these banking services. Content Type(s): Publications, Bank of Canada Review articles Topic(s): Financial services, Foreign reserves management, Payment clearing and settlement systems JEL Code(s): E, E5, E50, G, G2, G20
May 14, 2015 The Use of Cash in Canada Bank of Canada Review - Spring 2015 Ben Fung, Kim Huynh, Gerald Stuber The Bank of Canada’s 2013 Methods-of-Payment Survey indicates that the share of cash in the overall number of retail transactions has continued to decrease, mainly because of increased use of contactless credit cards. The share of cash in the total value of retail transactions was virtually unchanged from 2009 to 2013. In particular, the value share of cash transactions above $50 increased. Automated banking machines (ABMs), still the major source of cash for Canadians, were used less often in 2013 than in 2009. Cash use in Canada is broadly similar to that in Australia and the United States. Content Type(s): Publications, Bank of Canada Review articles Topic(s): Bank notes, Digital currencies and fintech, Econometric and statistical methods, Financial system regulation and policies, Payment clearing and settlement systems JEL Code(s): C, C8, C83, E, E4, E42, G, G2, G21, L, L8, L81
Euro Area Government Bonds—Integration and Fragmentation During the Sovereign Debt Crisis Staff Working Paper 2015-13 Michael Ehrmann, Marcel Fratzscher The paper analyzes the integration of euro area sovereign bond markets during the European sovereign debt crisis. It tests for contagion (i.e., an intensification in the transmission of shocks across countries), fragmentation (a reduction in spillovers) and flight-to-quality patterns, exploiting the heteroskedasticity of intraday changes in bond yields for identification. Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Financial markets, Interest rates, International financial markets JEL Code(s): E, E5, F, F3, G, G1, G15
2013 Methods-of-Payment Survey Results Staff Discussion Paper 2015-4 Christopher Henry, Kim Huynh, Rallye Shen As the sole issuer of bank notes, the Bank of Canada conducts methods-of-payment (MOP) surveys to obtain a detailed and representative snapshot of Canadian payment choices, with a focus on cash usage. Content Type(s): Staff research, Staff discussion papers Topic(s): Bank notes, Digital currencies and fintech JEL Code(s): E, E4
Funding Liquidity, Market Liquidity and the Cross-Section of Stock Returns Staff Working Paper 2015-12 Jean-Sébastien Fontaine, René Garcia, Sermin Gungor Following theory, we check that funding risk connects illiquidity, volatility and returns in the cross-section of stocks. We show that the illiquidity and volatility of stocks increase with funding shocks, while contemporaneous returns decrease with funding shocks. Content Type(s): Staff research, Staff working papers Topic(s): Asset pricing, Financial markets JEL Code(s): E, E4, E43, H, H1, H12
Effects of Funding Portfolios on the Credit Supply of Canadian Banks Staff Working Paper 2015-10 H. Evren Damar, Césaire Meh, Yaz Terajima This paper studies how banks simultaneously manage the two sides of their balance sheet and its implications for bank risk taking and real economic activity. First, we analyze how changes in funding affect the supply of bank loans. Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial stability, Financial system regulation and policies, Monetary policy implementation JEL Code(s): E, E5, E52, G, G2, G21
Securitization under Asymmetric Information over the Business Cycle Staff Working Paper 2015-9 Martin Kuncl This paper studies the efficiency of financial intermediation through securitization in a model with heterogeneous investment projects and asymmetric information about the quality of securitized assets. I show that when retaining part of the risk, the issuer of securitized assets may credibly signal its quality. Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Credit and credit aggregates, Economic models, Financial markets, Financial stability, Financial system regulation and policies JEL Code(s): E, E3, E32, E4, E44, G, G0, G01, G2, G20
Changing Labour Market Participation Since the Great Recession: A Regional Perspective Staff Discussion Paper 2015-2 Calista Cheung, Dmitry Granovsky, Gabriella Velasco This paper discusses broad trends in labour force participation and part-time employment across different age groups since the Great Recession and uses provincial data to identify changes related to population aging, cyclical effects and other factors. Content Type(s): Staff research, Staff discussion papers Topic(s): Labour markets, Recent economic and financial developments, Regional economic developments JEL Code(s): E, E2, E24, E3, E32, J, J1, J2, J21, J6
Does Financial Integration Increase Welfare? Evidence from International Household-Level Data Staff Working Paper 2015-4 Christian Friedrich Despite a vast empirical literature that assesses the impact of financial integration on the economy, evidence of substantial welfare gains from consumption risk sharing remains elusive. While maintaining the usual cross-country perspective of the literature, this paper explicitly accounts for household heterogeneity and thus relaxes three restrictive assumptions that have featured prominently in the past. Content Type(s): Staff research, Staff working papers Topic(s): International financial markets, International topics, Labour markets, Recent economic and financial developments JEL Code(s): E, E2, E21, F, F3, I, I3, I31