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The author traces developments in the Canadian covered bond market. Covered bonds could be a valuable way to provide a stable and diverse source of funding, particularly for smaller banks. However, higher issuance could increase banks’ vulnerability to liquidity stress, with implications for the broader financial system. The author argues that these benefits and challenges can be balanced in a well-designed policy framework.

This is the first of the Financial Markets Department’s descriptions of Canadian financial industrial organization. The document discusses the organization of the repurchase-agreement (repo) market in Canada.

Cover page

Silver Presentation Salver

The salver, which was bequeathed to the Bank of Canada by Lady Macmillan in 1967, is part of the artifact collection of the Bank of Canada Archives.
Photography by Mone Cheng, Innovacom, Ottawa.

This paper explains the nature of interest rates in the U.S. federal funds market after the 2007-09 financial crisis. We build a model of the over-the-counter lending market that incorporates new aspects of the financial system: abundance of liquidity, different regulatory standards for banks, and arbitrage opportunities created by limited access to the facility granting interest on excess reserves.

Deputy Governor Tim Lane discusses the global economic outlook and the integral – and historic – role of transport and logistics in building Canada’s prosperity.

One year later, we review the events that took place in Canadian fixed-income markets at the beginning of the COVID-19 crisis and propose potential policy research questions for future work.

A series of major international financial crises in the 1990s, and the recent introduction of the euro, have renewed interest in alternative exchange rate systems. The choice of exchange rate regime is particularly relevant for emerging-market countries because other countries are perceived either as having no alternative to their current exchange rate arrangement or as highly unlikely to change. This article examines the evolution of exchange rate regimes in emerging markets over the past decade and compares the strengths and weaknesses of the various available systems. These include intermediate regimes, such as the adjustable pegged exchange rate popular throughout much of the post—war period, and the two extreme exchange rate regimes: permanently fixed or freely floating exchange rate regimes. Two recently proposed alternatives are also evaluated: the Managed Floating Plus and Baskets, Bands, and Crawling Pegs. Both try to combine the best elements of the flexible and fixed exchange rate systems, but the Managed Floating Plus is deemed to be the more promising alternative.

Deputy Governor Jean Boivin discusses aging in Canada and its impact on our economy.

We provide empirical evidence on the impact of oil supply shocks on global aggregates. To do this, we first extract structural oil supply shocks from a standard oil-price determination model found in the literature.

Chief Operating Office Filipe Dinis outlines how the Bank is strengthening its cyber defenses and helping improve the financial system’s cyber resilience and its ability to recover quickly from attacks.