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We study how the interaction of market power and nominal price rigidity influences inflation dynamics. We find that pass-through declines with price stickiness when markets are concentrated, which implies a lower slope of the New Keynesian Phillips curve.

Recently, the Bank of Canada has estimated the effective lower bound (ELB) on its policy interest rate to be about -50 basis points. This article outlines the analysis that underpins that estimate by quantifying the costs of storing and using cash in Canada. It also explores how some international markets have adapted to negative interest rates, issues surrounding their implementation, as well as their transmission to other interest rates in the economy. Finally, it discusses theoretical ideas on how the ELB could be reduced further.

In our analysis of the US productivity slowdown in the 1970s and 2000s, we find that a significant portion of this deceleration can be attributed to a lack of improvement in allocative efficiency across sectors. Our analysis further identifies increased sector-level volatility as a major contributor to this lack of improvement in allocative efficiency.

The financial system makes an important contribution to the welfare of all Canadians. The ability of households and firms to confidently hold and transfer financial assets is one of the fundamental building blocks of the Canadian economy.

Using the quantum Monte Carlo algorithm, we study whether quantum computing can improve the run time of economic applications and challenges in doing so. We apply the algorithm to two models: a stress testing bank model and a DSGE model solved with deep learning. We also present innovations in the algorithm and benchmark it to classical Monte Carlo.

Governor Tiff Macklem discusses how structural change—driven by U.S. protectionism, AI, and slowing population growth—is reshaping Canada’s economy. He outlines the Bank’s role in maintaining low and stable inflation while helping the economy through the transition.

We forecast recessions in Canada using an autoregressive (AR) probit model. The results highlight the short-term predictive power of the US economic activity and suggest that financial indicators are reliable predictors of Canadian recessions. In addition, the suggested model meaningfully improves the ability to forecast Canadian recessions, relative to a variety of probit models proposed in the Canadian literature.

Technology, risk tolerance and regulation may influence dealers to reduce their trading as principals (using their own balance sheets for sales and purchases of securities) in favour of agency trading (matching client trades).

Did supply disruptions and cost pressures play a role in rising inflation in 2020 during the COVID-19 pandemic? Using data collected from websites of large retailers in multiple sectors and countries, we show that shortages may indicate transitory inflationary pressures.

This paper explores how the Canadian futures market contributed to banks’ systemic risk during the 2008 financial crisis. It finds that core banks as a whole traded against the periphery, in this way increasing their risk of simultaneous losses.