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In the interbank market, banks will sometimes trade below the central bank's deposit rate. We explain this anomaly using a theory based on market frictions and relationship lending.

Non-default losses of financial market infrastructures (FMIs) have gained attention due to their potential impacts on FMIs and FMI participants, and the lack of a common approach to address them. A key question is, who should absorb these losses?

Deputy Governor Paul Beaudry discusses the macroeconomic lessons we’ve learned during the COVID-19 pandemic, and what lies ahead to bring inflation back to target.

Chief Operating Office Filipe Dinis outlines how the Bank is strengthening its cyber defenses and helping improve the financial system’s cyber resilience and its ability to recover quickly from attacks.

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.

We document a new empirical finding in the foreign exchange market: currency returns show systematic reversals around the benchmark fixings. Specifically, the US dollar, on average, appreciates in the hours before fixes and depreciates after fixes.

Since 2009, the G-20 Framework for Strong, Sustainable and Balanced Growth has provided a mechanism for international macroeconomic policy coordination. The Framework has had some successes, including agreement on objectives for fiscal consolidation. However, post-crisis global growth has been neither strong nor balanced. Progress has also been slow in developing credible fiscal consolidation plans in some advanced countries and in increasing exchange rate flexibility in certain emerging economies. A stronger peer review process and enhanced analysis of international spillovers would increase the Framework’s influence on member policies.

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.

In August 2012, the New York Stock Exchange launched the Retail Liquidity Program (RLP), a trading facility that enables participating organizations to quote dark limit orders executable only by retail traders.