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Why do BigTech platforms introduce payment services? We explore this using a model in which a monopoly platform faces a trade-off between the costs associated with privacy concerns and the revenue from data services. We then analyze the feedback effects between data and payments.

In this issue, Bank researchers discuss inflation dynamics and global trade following the 2007–09 financial crisis. Other articles explore changes to the governance and regulation of the Canadian payments system and outline the banking services provided by the Bank of Canada. Finally, the results of the 2013 Methods-of-Payment Survey are presented.

This note uses industry data and a unique dataset of small and medium-sized merchants to provide insights into the acquirer-merchant market in Canada.

We conduct surveys to study how consumer spending responds to higher inflation expectations. Most respondents spend the same, sticking to fixed budget plans or not considering inflation for spending decisions. About 20% decrease spending because they feel poorer and cut spending to invest in inflation-proof assets. Very few increase spending.

How do changes to personal and corporate income tax rates in the United States affect its trading partners? Spillover effects from cuts in the two taxes differ. They are generally small and negative for corporate taxes, but sizable and positive for personal income taxes.

Financial market expectations regarding future changes in the target for the overnight rate of interest are an important source of information for the Bank of Canada. Financial markets are the mechanism through which the policy rate affects other financial variables, such as longer-term interest rates, the exchange rate, and other asset prices. An accurate measure of their expectations can therefore help policy-makers assess the potential impact of contemplated changes. Johnson focuses on the expectations hypothesis, which measures expectations of future levels of the target overnight rate as implied by current money market yields. Although expectations can be derived from the current yield on any short-term fixed-income asset, some assets have proven to be more accurate predictors than others. The implementation of a policy of fixed-announcements dates has coincided with the increased predictive power of these short-term assets. As a result of this improvement, a relatively simple model of the yield curve can now provide an accurate measure of financial market expectations.

Forecasts of the price of crude oil play a significant role in the conduct of monetary policy, especially for commodity producers such as Canada. This article presents a range of recently developed forecasting models that, when pooled together, can generate, on average, more accurate forecasts of the price of oil than the oil futures curve. It also illustrates how policy-makers can evaluate the risks associated with the baseline oil price forecast and how they can determine the causes of past oil price fluctuations.

In an economy where production takes place in multiple stages and is subject to financial frictions, how firms finance intermediate inputs matters for aggregate outcomes. This paper focuses on trade credit—the lending and borrowing of input goods between firms—and quantifies its aggregate impacts during the Great Recession.

This note presents PULSE, a new measure of underlying inflation in Canada based on a dynamic factor model estimated on disaggregated inflation data. PULSE captures the persistent component of inflation and decomposes it into broad-based and sector-specific inflationary pressures.

Carbon dioxide emissions have been commonly modelled as rising and falling with total output. Yet many factors, such as energy-efficiency improvements and shifts to cleaner energy, can break this relationship. We evaluate these factors using US data and find that changes in energy efficiency of consumption goods explain a significant proportion of emissions fluctuations. This finding also implies that models that omit energy efficiency likely overestimate the trade-off between environmental protection and economic performance.