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Since the autumn of 1997, the regional offices of the Bank of Canada have conducted quarterly consultations with businesses across Canada. These consultations, summarized in the Business Outlook Survey (BOS), are structured around a survey questionnaire that covers topics of importance to the Bank, notably business activity, pressures on production capacity, prices and inflation, and credit conditions.

This paper studies the welfare effects of different credit arrangements and how these effects depend on the trading mechanism and inflation. In a competitive market, a deviation from the Friedman rule is always sub-optimal. Moreover, credit arrangements can be welfare-reducing, because increased consumption by credit users will drive up the price level so that money users have to reduce consumption when facing a binding liquidity restraint.

This paper studies a dynamic version of the Holmstrom-Tirole model of intermediated finance. I show that competitive equilibria are not constrained efficient when the economy experiences a financial crisis. A pecuniary externality entails that banks’ desire to accumulate capital over time aggravates the scarcity of informed capital during the financial crisis.

Most central banks effect changes to their target or policy rate in discrete increments (e.g., multiples of 0.25%) following public announcements on scheduled dates. Still, for most applications, researchers rely on the assumption that the policy rate changes linearly with economic conditions and they do not distinguish between dates with and without scheduled announcements.

This paper investigates the effect of oil price uncertainty on real economic activity using a quarterly VAR with stochastic volatility in mean. Stochastic volatility allows oil price uncertainty to vary separately from changes in the level of oil prices, and thus the impact of oil price uncertainty can be examined in a more flexible yet tractable way.

This paper documents a link between the real and financial sides of the economy. We find that retail equity mutual fund flows in Canada are negatively related to current and past changes in a component of the prime and 5-year mortgage rates that is uncorrelated with government rates.

An international initiative to increase the use of central clearing for OTC derivatives emerged as one of the reactions to the 2008 financial crisis. The move to central clearing is a fundamental change in the structure of the market.

The financial transaction tax (FTT) is a policy idea with a long history that, in the wake of the global financial crisis, has attracted renewed interest in some quarters. This article examines the evidence of the impact of an FTT on market quality and explores a few of the practical issues surrounding the implementation of an FTT. Proponents argue that an FTT will generate substantial tax revenues and reduce market volatility. The majority of the empirical evidence, however, supports the arguments of opponents of the tax who assert that an FTT reduces volume and liquidity and increases volatility. In addition, there are numerous challenges in implementing an FTT, which may reduce the intended revenues. Whether an FTT is beneficial hinges on its effect on market quality and its ability to raise revenues. However, there are many unanswered questions regarding its design.