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Using highly disaggregated transaction-level trade data, we document the importance of new firm-level trade partner relationships and the addition of new products to existing relationships in driving aggregate trade flows.

I examine the impact of non-regulated lenders in the mortgage market using a dynamic stochastic general equilibrium (DSGE) model. My model features two types of financial intermediaries that differ in three ways: (i) only regulated intermediaries face a capital requirement, (ii) non-regulated intermediaries finance themselves by selling securities and cannot accept deposits, and (iii) non-regulated intermediaries face a more elastic demand.

This report highlights how an effective resolution regime promotes financial stability. It does this by ensuring that financial market infrastructures (FMIs) would be able to continue to provide their critical functions during a period of stress when an FMI’s own recovery measures were failing. The report explains the Bank of Canada’s new role as the resolution authority for FMIs, which will further bolster financial system resilience.

An important channel in the transmission of monetary policy is the relationship between the short-term policy rate and long-term interest rates. Using a new term-structure model, the authors show that the variation in long-term interest rates over time consists of two components: one representing investor expectations of future policy rates, and another reflecting a term-structure risk premium that compensates investors for holding a risky asset. The time variation in the term-structure risk premium is countercyclical and largely determined by global macroeconomic conditions. As a result, long-term rates are pushed up during recessions and down during times of expansion. This is an important phenomenon that central banks need to take into account when using short-term rates as a policy tool.

This paper studies how the impact of a cyber attack that paralyzes one or multiple banks' ability to send payments would transmit to other banks through the Canadian wholesale payment system. Based on historical payment data, we simulate a wide range of scenarios and evaluate the total payment disruption in the system.

This article examines the changes that have occurred in the composition of funds raised by provincial borrowers during the 1990s. Higher financing requirements, coupled with the declining availability of funds from non-market sources such as the Canada Pension Plan, led provincial governments and their Crown corporations to broaden and to diversify their debt management programs. In particular, provincial borrowers expanded their presence in foreign bond markets, increased their issuance of floating-rate debt, and incorporated a wide variety of innovative debt instruments into their borrowing programs in order to minimize their borrowing costs and to manage the risks associated with the issuing of debt. As a result, the composition of funds raised by provincial borrowers during the 1990s differed markedly from that of the previous decade: between 1990 and 1995, provincial borrowing requirements were met almost entirely through the issuance of marketable debt, and net new foreign currency debt issues averaged nearly 50 per cent of funds raised, whereas between 1980 and 1989, non-market sources provided close to 30 per cent of funds raised, and net new foreign currency debt issues provided less than 20 per cent.

Can monetary policy influence the neutral real interest rate (r-star)? Using a new statistical model, we show that interest rate hikes tend to lower r-star and long-run growth, but that monetary policy explains only a small share of the long-run decline in r-star.

The Bank projects the Canadian economy will grow by 2.4 per cent in 2012 and 2013 before moderating to 2.2 per cent in 2014. The economy is now expected to return to full capacity in the first half of 2013.

This Report outlines recent developments in the Canadian economy that affect the rate of inflation and provides an account of the measures taken by the Bank of Canada to control inflation.

In this paper, the authors assess the relationship between digitalization and labour demand and supply, and how this relationship affects wages and income inequality. We also explore implications of recent digitalization trends for the future of work.