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Deputy Governor Tim Lane discusses the links between monetary policy and financial stability.

We identify and quantify fiscal news shocks, compiling events (2001–2023) that altered the expected path of U.S. defense expenditure. For each event, we estimate market-implied shifts in expected spending. A shift-share analysis yields a two-year, metropolitan statistical area–level GDP multiplier of approximately 1 for U.S. military build-ups.

Freedman and Engert focus on the changing pattern of lending and borrowing in Canada in the past thirty to forty years, including the types of financial instruments used and the relative roles of financial institutions and financial markets. They examine how borrowing mechanisms have changed over time and consider the challenges facing the Canadian financial sector, including whether our financial markets are in danger of disappearing because of the size and pre-eminence of U.S. financial markets. Some of the trends examined here include syndicated lending, securitization, and credit derivatives, a form of financial engineering that has become increasingly important in the last few years. They also study bond and equity markets to determine whether Canadian capital markets have been hollowed out or abandoned by Canadian firms and conclude that the data do not provide much support for that view.

Should a central bank take over the provision of e-money, a circulable electronic liability? We discuss how e-money technology changes the tradeoff between public and private provision, and the tradeoff between e-money and a central bank's existing liabilities like bank notes and reserves.

The Bank of Canada’s current suite of models faces challenges in addressing network effects that integrate household and firm-level heterogeneity and their behaviours. We develop CANVAS, a Canadian behavioural agent-based model to contribute to the Bank’s next-generation modelling effort. CANVAS improves forecasting performance and expands capacity for model-based scenario analysis.

Households report distinctive views of the macroeconomy along partisan lines, while their expectations about personal finances do not follow the same pattern. Economic inequality remains the major contributor to polarized views of the macroeconomy. Partisan politics are simply a magnifier.

The financial system makes an important contribution to the welfare of all Canadians. The ability of households and firms to confidently hold and transfer financial assets is one of the fundamental building blocks of the Canadian economy.

We assess whether more central clearing would enhance the resilience of Canadian fixed-income markets. Our analysis estimates the potential benefits of balance sheet netting under scenarios where central clearing is expanded to new participants.

We review the literature on central bank forecasting with a special focus on the Federal Reserve, European Central Bank, Bank of England and Bank of Canada.