Bank of Canada paper estimates settlement balance demand

A working paper, published by the Bank of Canada in May, provides an estimate of the supply of settlement balances required by the central bank to keep overnight interest rates at the lower bound of the target band (1% plus or minus 25 basis points).

The author, Nellie Zhang, uses a regression controlling for important calendar events to predict the required supply of settlement balances. The model suggests that $2.405 billion (US$2.32 billion) will maintain rates at the lower bound, but the