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Text of major 1995 lecture by Bank Governor Gordon Thiessen, plus articles from Bank of Canada Review and other sources

The world needs an international institution to promote a new monetary order—a well-functioning, market-based global financial system. This will be the subject of my remarks today.

The hedge fund industry has been growing so quickly that meetings like this one are welcome—they provide a chance to step back and look at context and trends. And that's what I propose to do this morning. Specifically, I'd like to speak about volatility in both the real economy and in financial markets and discuss how it has been affected by monetary policy and financial innovation.

This issue focuses on the upcoming renewal of Canada’s inflation-control target. Bank researchers discuss the estimate of the lower bound to policy interest rates in Canada. They also discuss downward nominal wage rigidity and whether its presence warrants considering a higher inflation target. The third article highlights the experience some international central banks have had with unconventional monetary policies. The final article describes monetary policy frameworks in 10 advanced economies.

Deputy Governor Timothy Lane explains how the Bank of Canada is preparing for a future where Canadians may need a digital currency issued by their central bank.

The Canadian financial system comprises financial markets, financial institutions, and the clearing and settlement systems.

We build a network formation game of firms with trade flows to study the adoption and usage of a new digital currency as an alternative to correspondent banking.

Donald Gow had a great interest in public administration and in budgetary reform in the federal government.1 He was one in a long line of Queen's professors who have focused on various budgetary matters at the federal level.

Given the Bank of Canada's strong interest in the safe and efficient operation of major clearing and settlement systems, the Bank maintains a rigorous research agenda as a means of informing payments system policy and oversight. In this article, Arjani and Engert review recent research undertaken by Bank staff concerning the risk and efficiency of the Large Value Transfer System (LVTS). Based on the findings from this research, the authors conclude that the design of the LVTS strikes an effective balance between risk and efficiency. The article also demonstrates the increased use of simulation analysis as a tool for conducting payments system research. A brief summary of the Bank's oversight strategy for systemically important payments systems is also provided. Goals for future research are noted as well, including modelling of participant behaviour and continued external collaboration with other researchers.

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.