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This report reviews the use of quantitative tools to gauge market participants’ assessment of banking system resilience. These measures complement traditional balance-sheet metrics and suggest that markets consider large Canadian banks to be better placed to weather adverse shocks than banks in other advanced economies. Compared with regulatory capital ratios, however, the measures suggest less improvement in banking system resilience since the pre-crisis period.

The Canadian financial industry continues to experience significant changes. This report provides an update on recent developments and re-examines a number of issues facing financial service providers that were identified in Technical Report No. 82.

The current international monetary system is in need of reform. This article first provides an assessment of the existing system, highlighting both its strengths and weaknesses. It notes that the system has not facilitated the symmetric and timely adjustment in the real exchange rate necessary to accommodate the integration of China and other emerging-market economies into the global economy. This lack of adjustment contributed to the global financial crisis and recession and, because it is forestalling the required rotation of global demand, is hindering the global recovery. The article then discusses reform of the system that would see all systemically important countries and currency areas adopt market-based and convertible floating exchange rates supported by appropriate monetary, fiscal and financial sector policy frameworks. It also examines the roles of the G-20 countries and major international financial institutions in promoting and facilitating the system’s transition.

The COVID-19 pandemic has caused an atypical recession in which some sectors of the economy boomed and others collapsed. This required a unique fiscal policy reaction to both support firms and stimulate activity in sectors with slack. Was fiscal policy able to get where it was needed? Mostly, yes.

Until recently, there have been few efforts to systematically measure and aggregate the nominal value of the different types of sovereign government debt in default. To help fill this gap, the Bank of Canada’s Credit Rating Assessment Group (CRAG) has developed a comprehensive database of sovereign defaults posted on the Bank of Canada’s website that now is updated in partnership with the Bank of England.

We study the labour market and welfare effects of expanding unemployment insurance benefits and introducing payroll subsidies during the COVID-19 pandemic. We find that both policies are complementary and are beneficial to different types of workers. Payroll subsidies preserve the employment of workers in highly productive jobs, while unemployment insurance replaces lost income for workers who experience inevitable job loss.

In 1996 inflation remained within the Bank’s target range but was subject to downward pressure. The low rate of inflation contributed to a major easing in monetary conditions, and interest rates reached their lowest level in 30 years.

The financial system, which consists of financial institutions, financial markets, and clearing and settlement systems, lays an important role in a nation’s economy. Sound and efficientfinancial systems can make a significant contribution to economic growth.

Despite COVID-19 challenges, bold policy measures in Canada have helped businesses manage cash flow pressures and kept insolvency filings low. But the impact of the pandemic has been uneven, and the financial health of some firms may further deteriorate over the next year.

While quantitative easing (QE) in the United States likely increased capital flows to emerging-market economies (EMEs), putting upward pressure on asset prices and exchange rates, diverging fundamentals between advanced economies and EMEs were also important drivers. Evidence suggests that the benefits of QE to EMEs, in higher global demand and increased confidence, appear to outweigh the costs. When advanced economies begin to normalize monetary policy, the best defence for EMEs against any potential instability is likely to be further strengthening of their macroeconomic and financial policy frameworks.