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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?

The financial system, which consists of financial institutions, financial markets, and clearing and settlement systems, lays an important role in a nation’s economy. Sound and efficientfinancial systems can make a significant contribution to economic growth.

Derivatives exchanges often determine collateral requirements, which are fundamental to market safety, with dated risk models assuming normal returns. However, derivatives returns are heavy-tailed, which leads to the systematic under-collection of collateral (margin). This paper uses extreme value theory (EVT) to evaluate the cost of this margin inadequacy to market participants in the event of default.

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.

Since the 2016 summer survey, the results from a question on future sales indicators (FSI) have been included in the Business Outlook Survey (BOS). This backgrounder briefly describes the question and presents the correlations between the responses and various measures of business activity.

An essential element of the Bank of Canada's inflation-targeting framework is a floating exchange rate that is free to adjust in response to shocks that affect the Canadian and world economies. This floating rate plays an important role in the transmission mechanism for monetary policy. A practical question is how the Bank of Canada incorporates currency movements into the monetary policy decision-making process. Only after determining the cause and persistence of exchange rate change, and its likely net effect on aggregate demand, can the Bank decide on the appropriate policy response to keep inflation low, stable, and predictable. Ragan reviews the need to target inflation and the transmission mechanism for monetary policy, including the role of the exchange rate, before describing two types of exchange rate movements and their implications for monetary policy.

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."

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.

How do firms change their employment decisions when tax benefits for low-earning workers are expanded? Some firms increase employment overall, whereas others replace high-earning workers with low-earning workers, according to German linked employer-employee data.