Inventory Management Using a Weekly Review (s, S) Policy at the Bank of Canada

While the inventory management problem faced by central banks is complicated in that they must deal with two-way shipments, complex costing agreements and insurance limits on inventory, we were able to develop an adapted version of an (s,S) policy that reduced the costs of the central bank’s inventory management by 25%. Implementation required very little change to the regular practices of the Bank and resulted in very few unintended consequences.

Central Banking and Inequalities: Old Tropes and New Practices

This paper presents a critical analysis of the stance taken on inequality by two central banks since 2015: the Bank of Canada (BoC) and the Federal Reserve (Fed). The analysis is informed by a computer-assisted discourse analysis of how central bankers from the two institutions position themselves when it comes to issues of inequality. We observe that the position on inequality of the two central banks has changed in recent years and continues to do so. We argue that the stance on inequality taken by the BoC and the Fed suffers from a number of both inconsistencies and shortcomings. On the one hand, the BoC and the Fed claim that monetary policy instruments are too blunt to target specific sectors of the economy. On the other hand, with their response to COVID-19, they have demonstrated that such targeting is possible after all.

Prospects for Canada to end-2021

Subject Prospects for Canada to end-2021. Significance As Canada prepares for a widely expected federal election later this year, a severe third wave of COVID-19 is receding across the country. As restrictions are lifted, a wave of consumer spending will buoy the economy through the rest of 2021. An economic boom is expected, although rising inflation and the potential for early interest rate rises by the Bank of Canada pose economic challenges for the future.

Central Banks Digital Currencies: World Experience

Received 28.07.2020. The article examines issues related to the introduction of central bank digital currencies (CBDC) for retail payments and wholesale settlements. The study defines and classifies central bank digital currencies, researches the main models of CBDC systems. The article also analyzes the features of various national projects for issuing Central bank digital currencies. The paper uses methods of economic-statistical and functional-structural analysis. The study concludes that CBDC are a new form of central bank money. Digital currencies can be issued in various issuing systems for the purpose of retail payments or wholesale settlements. Among the models of CBDC systems for retail payments (R-CBDC) the direct system model is the most attractive for its simplicity. This model eliminates the dependence of the Central bank on any financial and payment intermediaries. Models of synthetic and hybrid R-CBDC systems are characterized by reliability and speed in processing multiple transactions which makes them the most promising for implementation. Among the models of CBDC systems for wholesale payments (W-CBDC) the model of the system with a universal digital currency (U-W-CBDC) may be the most suitable for eliminating the main disadvantages of modern cross-border payment systems. However, a large number of technological and financial changes as well as the high operating costs of the U-W-CBDC can make such systems difficult to implement for non-developed financial market infrastructure countries. National financial regulators have different motivations for issuing digital currencies. The main advantages of digital currencies for retail payments may consist in providing users with highly liquid, low-risk, universally available means of payment. The main advantages of wholesale digital currencies are that they offer faster, safer, cheaper cross-border payments. The most advanced projects for issuing R-CBDC can be considered DCEP (People’s Bank of China) E-krona (Central Bank of Sweden). The most successful pilot projects for issuing W-CBDC are the projects Jasper (Central Bank of Canada) and Ubin (Monetary Authority of Singapore), which were able to achieve interoperability in conducting cross-border payments. Currently most CBDC are retail based on the use of distributed ledger technology and implemented in the form of DLT-tokens. Countries that develop digital currency systems can be divided into three groups. The first group is countries where the introduction of CBDC can be designed to support the national demand for central bank money (Sweden, Norway, Singapore, etc.). The second group – countries for which the adoption of digital currencies can afford to keep the place of national currencies in international settlements (USA and EU) or expanding the use of national currencies at the international level (China). The third group represents countries for which the introduction of digital currencies may be associated with the control of national monetary circulation and de-dollarization of the financial system (Uruguay, South Africa, Cambodia, etc.).

Benchmarking Bitcoin Adoption in Canada: Awareness, Ownership and Usage in 2018

The Bank of Canada commissioned the Bitcoin Omnibus Survey in 2016 to monitor trends in the adoption and use of Bitcoin and other cryptoassets. This report presents findings from the latest iteration of the survey, which was conducted in 2018. We find that between 2016 and 2018 the share of Canadians who were aware of Bitcoin increased from 62 percent to 89 percent and those that owned Bitcoin increased from 3 percent to 5 percent. However, the share of past owners also increased, suggesting an influx of Bitcoin owners who subsequently divested after the steep rise of prices in 2017. The main reason for owning Bitcoin remains speculation, though this share decreased slightly since 2017. On the other hand, the share of Canadians who reported using Bitcoin for transactions a few times a month or more increased. Finally, we discuss how Bitcoin adopters differ from overall Canadians with respect to their financial literacy and cash holdings.

Comparative Analysis of the Implementation of the Inflation Targeting Monetary Strategy in Canada and New Zealand

Since the 1990s there have been major changes in the way monetary policy is conducted. Since other monetary strategies did not result in the desired outcome, the first concept of inflation targeting was presented in New Zealand (1990), then in Canada (1991), England (1992), Sweden and Finland (1993), Australia and Spain (1994), Israel, Chile, Brasil, the Czech Republic, Poland, Hungary, Serbia and other countries. Thus, the application of this monetary regime has spread from economically developed to developing countries. This article examines the adoption, the formal framework for inflation targeting and the experience of the two countries that were leaders in the adoption of this modern strategy, New Zealand and Canada. At the time of the announcement of the inflation targets, inflation in both countries was around 6%. However, there are differences regarding the time frame. So, in New Zealand in a shorter period of time, credibility should have been achieved regarding the imbalance of monetary and fiscal policy. While, on the other hand, a longer time frame is envisaged for the Central Bank of Canada regarding achieving greater flexibility to mitigate price shocks. After all the above, it can be concluded that both observed countries (Canada and New Zealand) during the period 2008-2017, achieved positive effects from inflation targeting. In this sense inflation rates in the target range of 1-3% were achieved, except for a few years after the financial crisis (2008-2011), but after certain revisions of the formal framework, both countries successfully fought for greater economic growth and financial stability. The inflation targeting regime proved to be very successful in achieving the set targets, so both Central Banks continued to constantly update the formal and informal inflation targeting frameworks, in order to continuously achieve the expected effects.

Canada

This paper reviews assessment of financial market infrastructures (FMIs) and authorities’ responsibilities in Canada. The report shows that the FMIs have operated normally under a well-established legal and oversight framework that is distinct for Canada. The Bank of Canada (BOC) has issued a Guideline that defines the criteria for identifying FMIs. Recognition of a clearing agency is also required under provincial securities legislation where terms and conditions and the clearing rule would apply. The current oversight approach can benefit from stronger enforcement powers available to the BOC. Provincial securities regulators are encouraged to train FMI oversight staff in advanced quantitative skills to support risk assessment. Further enhancement in managing liquidity and operational risks will help ensure the robust functioning of FMIs. Improvements in cyber resiliency continue in line with international guidance, including industry-wide exercises carried out by FMI operators and participants. However, compliance to endpoint security needs to be tightened by self-attestations and audits of FMI participants. The categorization and reporting of operational incident severity levels could be further coordinated.

How to Improve Inflation Forecasting in Canada

Against the backdrop of an ongoing review of the inflation-targeting framework, this paper examines the real-time inflation forecasts of the Bank of Canada with the aim of identifying potential areas for improvement. Not surprisingly, the results show that errors in forecasting non-core inflation (commodity prices etc.) are found to be the largest contributors to overall inflation forecast errors. Perhaps more importantly, relatively small core inflation forecast errors appear to mask large and offsetting errors related to the output gap and the policy interest rate, partly reflecting a tendency to overestimate the neutral nominal policy rate in real time. Faced with these uncertainties, the Governing Council’s gradual approach to changing its policy settings appears to have served it well.