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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.

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.

Over the last 30 years, the business mix of banks in Canada has changed significantly. Progress in information-processing technology, legislative changes, and market forces have combined to blur the traditional distinctions between banks and other financial institutions and have allowed banks to offer a much wider range of products and services. In this article, the author reviews the expansion of bank lending to households over this period and their recent movement into personal wealth management. While these trends were facilitated by revisions to legislation, they also reflected the changing needs of the "baby boom" generation, first as home-buyers and, more recently, as middle-aged investors. On the commercial and corporate side, banks reacted to the rapid expansion of securities markets (and to the reduced demand for intermediation by both lenders/depositors and borrowers) by moving into investment banking, after legislative changes opened this business to them in the late 1980s. They also used their expertise in credit assessment and risk management to provide credit guarantees and to act as counterparties and intermediaries in derivatives markets. Notable in this broadening of bank activities has been their more recent entry into the trust, mutual fund, and retail brokerage business. The banks have also made preliminary forays into insurance. The expansion of off-balance-sheet activities has made fee income an increasingly important part of bank earnings. The article also looks at the emerging tools and techniques that will most likely transform the structure of banking in the future.

I study a model of competing data intermediaries (e.g., online platforms and data brokers) that collect personal data from consumers and sell it to downstream firms.

How does the supply of nominal government debt affect the macroeconomy? To answer this question, we propose a portfolio-balance model of the yield curve in which inflation is determined through an interest rate rule.

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

Governor Tiff Macklem talks about diversity and inclusion are important for the Bank of Canada, for the economics and finance profession, and for the Canadian economy.

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.

The Reports section of the Financial System Review examines selected issues of relevance to the Canadian and global financial systems. The June 2015 issue features two reports summarizing recent work by Bank of Canada staff on specific financial sector policies.

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