Search

Although there has been some improvement in conditions over the past several weeks, strains in global credit markets have broadened since December.

FSR Highlights - June 2008

Errata: Some factual errors in the June report "Bank of Canada Oversight Activities during 2007 under the Payment Clearing and Settlement Act" have been corrected. They concern (i) clarification of the U.S. Federal Reserve as lead overseer of CLS Bank and (ii) the steps taken by CDS on 14 August 2007 to assist issuers and participants holding defaulted ABCP.

Take an in-depth look at the indicators related to financial stability.

Gordon Thiessen, Governor of the Bank of Canada, delivered the HERMES-Glendon Lecture at York University, Toronto, in March 1995. The speech focussed on the interrelationships of uncertainty and the transmission of monetary policy to the economy. It looked at how the various types of uncertainty influence the behaviour of economic actors, and at how uncertainty affects the transmission of monetary policy through the economy. The first part of the lecture outlines the Bank of Canada's view of the transmission mechanism, with considerable attention paid to the role of uncertainty. In the second part, the various ways in which the Bank has tried to reduce uncertainty are discussed. The various kinds of uncertainty that impinge on the economy and on the policy process are addressed.

In this analysis, we use simulations in the Bank of Canada’s projection model—the Terms-of-Trade Economic Model—to consider a suite of extended monetary policies to support the economy following the COVID-19 crisis.

Economists in the nineteenth century spent considerable time discussing the merits of a free-banking system, in which each commercial bank would be able to issue its own notes and deposits, subject to a convertibility requirement backed by its own gold reserves. Such a system, the proponents argued, would be able to deliver price-level stability yet be flexible enough to withstand the vicissitudes of the business cycle. Moreover, there would be no need for central banks. While this idea has received less attention in recent years, some economists still put it forward as a practical alternative to the current system. Laidler suggests that the centralizing tendencies in banking would inevitably undermine competition within a free-banking system, and lead to the natural emergence of one dominant bank. Other developments in the twentieth century, most notably the demise of the gold standard and widespread agreement that governments should play a determining role in setting monetary policy goals, have also limited the practicality of such a system. Laidler examines the Bank of Canada's history from the free-banking perspective and concludes that the current system of inflation targeting provides a much better anchor for orderly price-level behaviour than the free-banking system's convertibility could ever guarantee.

Deputy Governor Lawrence Schembri discusses the need to address cross-border obstacles to greater financial integration.

Governor Stephen S. Poloz discusses the global financial reforms and what they mean for the future of finance.

This monthly newsletter features the latest research publications by Bank of Canada economists including external publications and working papers published on the Bank of Canada’s website.

There are two broad classes of arguments for greater flexibility in the design and application of monetary policy frameworks. The BIS has done a great deal of useful work on asset-price targeting in particular and on the complicated interplay between monetary policy and financial stability in general.