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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.

Uncertainty surrounding the Bank of Canada’s future policy rates is measured using implied volatility computed from interest rate options and realized volatility computed from intraday prices of interest rate futures. Both volatility measures show that uncertainty decreased following major policy actions taken by the Bank in response to the 2007–09 financial crisis. Findings also indicate that, on average, uncertainty decreases following the Bank’s policy rate announcements.

Using micro data from the U.S. Consumer Expenditure Survey and Current Population Survey, I document that government spending shocks affect individuals differently over the life cycle.

We show that haircuts are rarely used in the Canadian dealer-to-client repo market and their usage did not increase materially during past stress events. Usage is concentrated among wealth managers and some foreign official institutions, likely reflecting regulatory or internal requirements.

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.

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.

This paper examines the interaction between quantitative easing (QE) and the securities lending facility (SLF) using a detailed dataset on Riksbank QE purchases, Swedish DMO SLF transactions and OTC repo deals. A theoretical model further shows how excess demand for assets and search frictions shift the SLF from a backstop to a first-resort tool.

The most extreme events, such as economic crises, are rare but often have a great impact. It is difficult to precisely determine the likelihood of such events because the sample is small.

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

The use of bank notes in Canada for payments has declined consistently for some time, and similar trends are evident in other countries. This has led some observers to predict a cashless society in the future.