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During downturns, workers get stuck in low-productivity jobs and wages remain stagnant. I build an heterogenous agent incomplete market model with a full job ladder that accounts for these facts. An adverse financial shock calibrated to the US Great Recession replicates the period’s slow recovery and missing disinflation.

This issue of the Financial System Review reflects the Bank’s judgment that high household indebtedness and housing market imbalances remain the most important vulnerabilities. While these vulnerabilities remain elevated, policy measures continue to improve the resilience of the financial system. A third vulnerability highlighted in the FSR concerns cyber threats to an interconnected financial system.

This paper provides an overview of digitalization and its economic implications. We assess the scope of digitalization in Canada as well as the challenges related to its measurement.

Operational events in the Large Value Transfer System (LVTS) almost always result in a disturbance of the regular flow of payments.

The Reports section of the Financial System Review examines selected issues of relevance to the Canadian and global financial systems. The June 2014 issue features three reports on financial system initiatives: making financial benchmarks more robust; implementing the stronger Basel III capital and liquidity framework for banks; and using stress tests to assess financial system risks.

Trade liberalizations increase the sales and input purchases of productive firms relative to their less productive domestic competitors. This reallocation affects firms’ market power in their product and input markets. I quantify how the labour market power of employers affects the distribution and size of the gains from trade.

The types of contracts that arise in a typical vertical manufacturer–retailer relationship are more sophisticated than usually assumed in standard macroeconomic models.

The authors estimate a sticky-price dynamic stochastic general-equilibrium model with a financial accelerator, à la Bernanke, Gertler, and Gilchrist (1999), to assess the importance of financial frictions in the amplification and propagation of the effects of transitory shocks.

Since the creation of Bitcoin in 2009, over 2,000 cryptocurrencies have been issued. We evaluate how well a cryptocurrency functions as a payment system.

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Depression Scrip

The examples of Depression scrip illustrated here are part of the National Currency Collection of the Bank of Canada.