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This article examines the efforts of the major advanced countries to strengthen the international financial system in order to avoid financial crises such as those that occurred in emerging-market economies in the 1990s. These efforts have focused on crisis prevention and crisis management. The prevention of such crises has necessitated the formation of new international groups that include emerging markets in their membership. Measures have also been taken to reduce the vulnerability of countries to such crises. These measures have centered on the need for appropriate macroeconomic policies, including the need for sustainable exchange rate regimes, sound domestic financial systems, and prudent risk management. In the area of crisis management, the International Monetary Fund (IMF) has been given access to additional resources for lending to countries that experience financial crises. The IMF has also established new lending facilities for use in such circumstances. It has also been agreed that the private sector will need to play a greater role in the management of such crises in the future.

Risk-management systems in financial institutions have come under increasing scrutiny in light of the current financial crisis, resulting in calls for improvements and an increased role for regulators. Yet such objectives miss the intricacy at the heart of the risk-management process. This article outlines the complexity inherent in any modern risk-management system, which arises because there are shortcuts in the theoretical models that risk managers need to be aware of, as well as the difficulties in sensible calibration of model parameters. The author suggests that prudential regulation of such systems should focus on failures within the financial firm and in the market interactions between firms and reviews possible strategies that can improve the performance of risk management and microprudential regulatory practice.

Using a structural model, we study the economic consequences of the COVID-19 shock. The uneven consequences, such as higher unemployment among young households, amplify the negative implications for the macroeconomy, household vulnerabilities and consumption inequality. Government support programs have stimulated the economy and lowered inequality and medium-term vulnerabilities.

This note presents the annual update of Bank of Canada staff estimates for growth in global potential output. These estimates served as key inputs to the analysis supporting the April 2025 Monetary Policy Report.

How might one simulate a million realistic income paths and compute their statistical moments in under a second? Using CUDA-based methods to estimate the Canadian earnings process, I find that the distribution of labour income growth is sharply peaked with heavy tails—similar to that in the United States.

The initiatives reviewed by the author were undertaken to ensure a liquid and well-functioning market for Government of Canada securities in light of the significant shift in the government's financial position. They include changes made in 1998 by the Bank of Canada and the government to the rules governing auctions and to the Bank's surveillance of the auction process, changes to the treasury bill and bond programs, and implementation of a pilot buyback program for Government of Canada marketable bonds. In addition, the Investment Dealers Association of Canada adopted a code of conduct for the secondary market. These initiatives were well received by the market and appear to have had a positive impact. The Bank and the government are, however, continuing their search for ways to maintain and enhance the efficiency of this market.

We analyze money financing of fiscal transfers (helicopter money) in two simple New Keynesian models: a “textbook” model in which all money is non-interest-bearing (e.g., all money is currency), and a more realistic model with interest-bearing reserves.

Does consumption smoothing fundamentally decrease during macroeconomic disasters? This paper uses a large historical dataset (1870–2016) for 16 industrial economies to show that during macroeconomic disasters (e.g., wars, pandemics, depressions) aggregate consumption and income are significantly less decoupled than during normal times.

We find that the CPI and PPI inflation indexes co-moved strongly throughout the late 20th century, but their correlation has fallen substantially since the early 2000s. We offer a structural explanation for this divergence based on the growth of global supply chains since 2000. This finding offers a unique perspective for the future design of optimal monetary policy.