Search

This issue of the Financial System Review reflects the Bank’s judgment that the high level of household indebtedness and housing market imbalances remain the most important vulnerabilities. While these vulnerabilities are still elevated, improving economic conditions and recent changes to housing policy should support an easing of these vulnerabilities over time. A third vulnerability highlighted in the FSR concerns cyber threats and the interconnectedness of the financial system.

This note finds evidence of a positive and nonlinear relationship between mortgage interest costs (MIC) and rental inflation: the impact of MIC on rents is small when population growth is near its historical norm, but significantly stronger during periods of rapid population growth.

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.

In this study, we enhance Markowitz portfolio selection with graph theory for the analysis of two portfolios composed of either EU or US assets. Using a threshold-based decomposition of their respective covariance matrices, we perturb the level of risk in each portfolio and build the corresponding sets of graphs.

Crowdfunding may enable unique products to reach the consumer market. I model a crowdfunding technology that publicly screens consumer demand early in the production process. In this model, entrepreneurs like crowdfunding for risky projects where demand is uncertain, but not for large, safe projects or for projects where production costs are uncertain.

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.

Digital payments and decentralized systems enable the creation of new financial products and services for users. One core challenge in digital payments is the need to protect users from fraud and abuse while retaining privacy in individual transactions. We propose a pseudonymous credential scheme for use in payment systems to tackle this problem.

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.

First, I should explain what I mean by flexibility. As most of you are surely aware, the Bank of Canada has been openly discussing the importance of promoting policies that support economic efficiency, including financial system efficiency. Efficiency refers to the allocation of scarce economic resources to the most productive uses, in a cost-effective way.

This note examines the relatively subdued pace of wage growth in Canada since the commodity price decline in 2014 and assesses whether the weakness is attributable to cyclical (e.g., labour market slack) or structural factors (e.g., resource reallocation and demographic change).