G21 - Banks; Depository Institutions; Micro Finance Institutions; Mortgages

• Safe Payments

  Staff Working Paper 2020-53 Jonathan Chiu, Mohammad Davoodalhosseini, Janet Hua Jiang, Yu Zhu

  In a cashless economy, would the private sector invest in the optimal level of safety in a deposit-based payment system? In general, because of externalities, the answer is no. While the private sector could over- or under-invest in safety, the government can use taxes or subsidies to correct private incentives.

  Content Type(s): Staff research, Staff working papers Topic(s): Central bank research, Digital currencies and fintech, Financial institutions, Payment clearing and settlement systems JEL Code(s): E, E4, E42, E5, E50, G, G2, G21

• Security and convenience of a central bank digital currency

  Staff Analytical Note 2020-21 Charles M. Kahn, Francisco Rivadeneyra

  An anonymous token-based central bank digital currency (CBDC) would pose certain security risks to users. These risks arise from how balances are aggregated, from their transactional use and from the competition between suppliers of aggregation solutions.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Central bank research, Digital currencies and fintech, Financial system regulation and policies, Payment clearing and settlement systems JEL Code(s): E, E4, E42, G, G2, G21

• Why Do Central Banks Make Public Announcements of Open Market Operations?

  Staff Working Paper 2020-35 Narayan Bulusu

  Central banks communicate the results of open market operations. This helps participants in financial markets more accurately estimate the prevailing demand and supply conditions in the market for overnight loans.

  Content Type(s): Staff research, Staff working papers Topic(s): Central bank research, Monetary policy implementation JEL Code(s): D, D5, D52, E, E5, E58, G, G2, G21

• The Interplay of Financial Education, Financial Literacy, Financial Inclusion and Financial Stability: Any Lessons for the Current Big Tech Era?

  Staff Working Paper 2020-32 Nicole Jonker, Anneke Kosse

  The objective of this paper is twofold. First, we assess whether financial education might be a suitable tool to promote the financial inclusion opportunities that big techs provide. Second, we study how this potential financial inclusion could impact financial stability.

  Content Type(s): Staff research, Staff working papers Topic(s): Development economics, Digital currencies and fintech, Financial markets, Financial services, Financial stability JEL Code(s): D, D1, D14, D9, D91, D92, G, G2, G21, G23, O, O1, O16

• 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

• An Economic Perspective on Payments Migration

  Staff Working Paper 2020-24 Anneke Kosse, Zhentong Lu, Gabriel Xerri

  Consumers, businesses and banks make millions of payments each day using a variety of instruments, such as debit cards, cheques and wires. Canada is currently developing three new systems to process these transactions: Lynx, Settlement Optimization Engine (SOE) and Real-Time Rail (RTR).

  Content Type(s): Staff research, Staff working papers Topic(s): Financial services, Financial system regulation and policies, Payment clearing and settlement systems JEL Code(s): E, E4, E42, G, G2, G21

• Dynamic Competition in Negotiated Price Markets

  Staff Working Paper 2020-22 Jason Allen, Shaoteng Li

  Repeated interactions between borrowers and lenders create the possibility of dynamic pricing: lenders compete aggressively with low prices to attract new borrowers and then raise their prices once borrowers have made a commitment. We find such pricing patterns in the Canadian mortgage market.

  Content Type(s): Staff research, Staff working papers Topic(s): Financial institutions, Financial services, Market structure and pricing JEL Code(s): D, D4, G, G2, G21, L, L2

• Household indebtedness risks in the wake of COVID‑19

  Staff Analytical Note 2020-8 Olga Bilyk, Anson T. Y. Ho, Mikael Khan, Geneviève Vallée

  COVID-19 presents challenges for indebted households. We assess these by drawing parallels between pandemics and natural disasters. Taking into account the financial health of the household sector when the pandemic began, we run model simulations to illustrate how payment deferrals and the labour market recovery will affect mortgage defaults.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Climate change, Coronavirus disease (COVID-19), Credit and credit aggregates, Econometric and statistical methods, Financial stability, Fiscal policy, Housing, Recent economic and financial developments, Sectoral balance sheet JEL Code(s): C, C2, C21, D, D1, D12, D14, E, E2, E24, E27, E6, E62, G, G2, G21, G28, R, R2

• How Do Mortgage Rate Resets Affect Consumer Spending and Debt Repayment? Evidence from Canadian Consumers

  Staff Working Paper 2020-18 Katya Kartashova, Xiaoqing Zhou

  We study the causal effect of mortgage rate changes on consumer spending, debt repayment and defaults during an expansionary and a contractionary monetary policy episode in Canada. We find asymmetric responses of consumer durable spending, deleveraging and defaults. These findings help us to understand household sector response to interest rate changes.

  Content Type(s): Staff research, Staff working papers Topic(s): Credit and credit aggregates, Interest rates, Monetary policy, Monetary policy transmission JEL Code(s): D, D1, D12, D14, E, E4, E43, E5, E52, G, G2, G21, R, R3, R31

• The Effect of Mortgage Rate Resets on Debt: Evidence from TransUnion (Part I)

  Staff Analytical Note 2020-2 Katya Kartashova

  This note studies how decreases in mortgage rates affect the behaviour of borrowers in terms of spending on durable goods and repaying debt.

  Content Type(s): Staff research, Staff analytical notes Topic(s): Credit and credit aggregates, Housing, Interest rates, Monetary policy, Monetary policy transmission JEL Code(s): D, D1, D12, D14, E, E4, E43, E5, E52, G, G2, G21, R, R3, R31