Search

Economic growth in Canada is expected to average about 2 1/2 per cent in 2014 and 2015 before easing to around the 2 per cent growth rate of the economy’s potential in 2016.

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

Because commodity prices help determine Canada’s terms of trade, employment, income and, ultimately, inflation, it is important to understand what causes them to fluctuate. Since the early 1900s, there have been four commodity price supercycles—which we define as extended periods of boom and bust that can take decades to complete. Now in its downswing phase, the current supercycle started after growth in China and other emerging-market economies in the mid-1990s resulted in an unexpected demand shock. The extent of this downswing depends on numerous factors that are presently uncertain.

Currency crises in the 1990s, especially those in emerging markets, have sharply disrupted economic activity, affecting not only the country experiencing the crisis, but also those with trade, investment, and geographic links. The authors review the theoretical literature and empirical evidence regarding these crises. They conclude that their primary cause is a fixed nominal exchange rate combined with macroeconomic imbalances, such as current account or fiscal deficits, that the market perceives as unsustainable at the prevailing real exchange rate. They also conclude that currency crises can be prevented through the adoption of sound monetary and fiscal policies, effective regulation and supervision of the financial sector, and a more flexible nominal exchange rate.

Dealers connect investors who want to buy or sell securities in financial markets. Over time, dealers and investors form trading networks to save time and resources. An emerging field of research investigates how networks form.

G-20 representatives, academics, market participants, and members of international financial institutions were brought together in Ottawa to explore the connection between robust financial markets and economic growth and development, share experiences, and to develop policy recommendations, where possible. Participants identified several areas they deemed critical for fostering strong domestic financial markets and reducing external vulnerability: sound macroeconomics policies, strengthened financial infrastructures and banking systems, and exchange rate flexibility for countries with widely open capital accounts. Papers presented in the six sessions and keynote address highlighted a number of issues, including currency mismatches, the sequence of financial liberalization and supervisory reforms, the development of local financial markets, infrastructure building and governance, and appropriate incentives.

The premium on “on-the-run” Treasuries is an anomaly. I explain it using a model in which primary dealers hold inventories of Treasuries. I use the model to analyze the effects of granting access to central bank facilities.

The Governing Council judges that the risks to the Canadian financial system have decreased somewhat relative to the December FSR, but that the overall level of risk remains high. The key risks are similar to those highlighted in December, and emanate primarily from the external environment.

We analyze factors that may explain consistent answers to questions about inflation expectations in the Canadian Survey of Consumer Expectations. We also compare the inflation forecasts of consumers with consistent responses with those of professional forecasters.