The concept of settlement balances is simple in its definition but complex when attempting to understand how they interplay between a central bank and the financial system. Settlement balances can be defined as interest-bearing deposits that belong to participants of Canada's payment system and...

While climate change was largely tackled by government policies in the past, central banks are increasingly grappling with the risks climate change poses. They are evaluating their operational policies to reflect these risks and the transition to a net-zero economy. This paper explores the...

Distortions in capital markets can create financial constraints that deter firms from pursuing optimal investment plans. This paper explores how much these constraints affect investment by ownership type in China, using a panel data model estimated with observations on listed firms for the...

Central counterparty (CCP) initial margin models are procyclical by nature, and CCPs use antiprocyclicality (APC) tools to mitigate this. However, despite the widespread use of such tools, margin models of CCPs around the world reacted severely to the heightened volatility during the March 2020...

The market for fiat-referenced cryptoassets, commonly known as stablecoins, has expanded rapidly in recent years alongside the growth of the cryptoasset ecosystem. In fact, the market capitalization of stablecoins increased by more than 30 times since the beginning of 2020. What risks could...

Our study aims to gain insight on financial stability and climate transition risk. We develop a methodological framework that captures the direct effects of a stressful climate transition shock as well as the indirect - or systemic - implications of these direct effects. We apply this framework...

The economic lockdowns that began in March 2020 in response to the COVID-19 pandemic led to an unparalleled level of financial market disruption. Investors sought liquidity by selling financial assets and drawing down loans and credit lines. The speed, scale and one-way nature of these...

The COVID-19 pandemic placed unprecedented strain on the global financial system. We describe how the Bank of Canada responded to the rapidly deteriorating liquidity in core Canadian fixed-income markets. We also describe how market functioning improved after the Bank intervened. The Bank...

This paper examines whether machine learning (ML) algorithms can outperform a linear model in predicting monthly growth in Canada of both house prices and existing home sales. The aim is to apply two widely used ML techniques (support vector regression and multilayer perceptron) in economic...

Central banks may engage in large-scale lending and asset purchases to stabilize financial markets and implement monetary policy during crises. The ability of these actions to restore financial market functioning is well documented; however, they come with costs. We provide a literature review of...