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Many reports and analyses interpret the release of new economic data based on the headline surprise—for instance, total inflation, real GDP growth and the unemployment rate. However, we find that headline news alone cannot adequately explain the responses of market prices to new information. Rather, market prices react more strongly, on average, to non-headline news such as the composition of GDP growth, quality of jobs created and revisions to past data. Thus, tracking the impact of non-headline information released on the news day is crucial in analyzing how markets interpret and react to new economic data.

In a competitive sales environment, merchants are compelled to offer consumers the option of paying for goods and services using a variety of payment methods, including cash, debit card, or credit card. Each method entails different costs and benefits to merchants. To better understand the costs of accepting retail payments, the Bank of Canada surveyed over 500 Canadian merchants and found that most consider cash the least costly. This article investigated this perception by calculating the variable costs per transaction of accepting different means of payment. The findings are that costs for each payment method vary by merchant and transaction value, with debit cards the least costly payment for a broad cross-section of merchants.

The physical network of bank branches is important in how consumers manage their cash holdings. This paper estimates how consumer withdrawal behaviour responds to the distance they must travel to their branch.

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

John Maynard Keynes said the objective of "analysis is … to provide ourselves with an organized and orderly method of thinking out particular problems .… This is the nature of economic thinking."

Deputy Governor Lawrence Schembri discusses the international evidence of underlying determinants of long-term movements in house prices.

We use bid data from Government of Canada bond auctions between 1999 and 2021 to gauge the yield sensitivity of these bonds to the issuance amount. Our new metric estimates the demand function of the bidders at each auction and offers insights into the relationship between supply and yield of government bonds.

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.