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Capital-goods imports have become an increasing source of growth for the U.S. economy. To understand this phenomenon, we build a neoclassical growth model with international trade in capital goods in which agents face exogenous paths of total factor and investment-specific productivity measures.

Do banks realize simultaneous trading losses because they invest in the same assets, or because different assets are subject to the same macro shocks? This paper decomposes the comovements of bank trading losses into two orthogonal channels: portfolio overlap and common shocks.

Governor Mark Carney discusses why Canada’s exports are lagging and what can be done to respond to the underlying challenges.

Decentralized finance surged in popularity around 2020. We explore its value and limitations and highlight some potential regulatory concerns.

This paper seeks to understand how outward foreign direct investment (FDI) affects the productivity of Canadian firms. We estimate the impact of outward greenfield investment on measures of firm-level productivity using FDI data from roughly 2,000 Canadian firms and more than 4,000 outward FDI projects over the 2003–14 period.

We study liquidity requirements in a framework with fire sales. The framework nests three common pricing mechanisms and produces the same observables. Absent risk-sharing considerations, the equilibrium is efficient with cash-in-the-market pricing; a liquidity requirement is optimal with second-best-use pricing; and a liquidity ceiling (i.e., a cap on liquid assets) is optimal with adverse selection.

This paper studies how financial shocks shape the distribution of output growth by introducing a quantile-augmented vector autoregression (QAVAR), which integrates quantile regressions into a structural VAR framework. The QAVAR preserves standard shock identification while delivering flexible, nonparametric forecasts of conditional moments and tail risk measures for gross domestic product.

The Risk Amplification Macro Model (RAMM) is a new nonlinear two-country dynamic model that captures rare but severe adverse shocks. The RAMM can be used to assess the financial stability implications of both domestic and foreign-originated risk scenarios.

This article examines the incentives for banks to hold various assets on their balance sheets for use as collateral when the opportunity cost of doing so can be high. Focusing on the five-year period (2002-07) that preceded the financial crisis, it examines the choices made by financial institutions among the assets that are pledged as collateral in Canada's Large Value Transfer System. This serves as a baseline for collateral-management practices during relatively normal times. The results of this study are important for policy-makers, especially the Bank of Canada, which is concerned both about the efficient functioning of fixed-income markets and about the credit risk it ultimately bears in insuring LVTS settlement. The results suggest that relative market liquidity and market-making capacity are important factors in the choice of securities pledged as collateral in the LVTS.