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This paper explains the nature of interest rates in the U.S. federal funds market after the 2007-09 financial crisis. We build a model of the over-the-counter lending market that incorporates new aspects of the financial system: abundance of liquidity, different regulatory standards for banks, and arbitrage opportunities created by limited access to the facility granting interest on excess reserves.

We investigate the unintended consequences of the Home Affordable Refinance Program (HARP). Originally designed to help borrowers refinance after the 2008–09 global financial crisis, HARP inadvertently strengthened the market power of incumbent lenders by creating a cost advantage for them. Despite a 2013 policy rectifying this cost advantage, we still find significant welfare losses for borrowers.

We explore the consumer value proposition of a hypothetical Digital Canadian Dollar, adoption considerations and the users who would benefit most from this potential new payment method. We employ a design-thinking consultation methodology, allowing participants to interact with research prototypes of increasing complexity to reveal user preferences, constraints and adoption influences.

In 2023, the share of Canadian banks’ foreign assets and liabilities amounted to around 50%. While Canadian banks engage domestically mostly with households and non-financial corporations, their most common counterparties abroad are non-bank financial institutions.

In a recent speech, Deputy Governor Sheryl Kennedy discusses how the efficiency of Canada's capital markets compares in a global context. Taking into account the three inter-related aspects of an efficient market (allocational, operational, and informational efficiency), Kennedy reviews the recent performance of Canadian capital markets under such headings as size, completeness, and access to capital and the instruments needed to hedge, or distribute, risk (allocational efficiency). To assess operational efficiency, she considers Canadian markets' liquidity and whether their transactional costs are competitive. Finally, she reviews transparency and market integrity (and how integrity is maintained) to determine markets' informational efficiency. She also offers several suggestions as to how Canadian markets can continue to be improve and maintain their competitiveness.

The literature highlights that labour market churn, including job-to-job transitions, is a key element of wage growth. Using microdata from the Labour Force Survey, we compute measures of labour market churn and compare these with pre-crisis averages to assess implications for wage growth.

Banks’ business interactions create a network of relationships that are hidden in the correlations of bank stock returns. But for policy interventions, we need causality to understand how the network changes. Thus, this paper looks for the causal network anticipated by investors.

We study economies where firms acquire capital in primary markets then retrade it in secondary markets after information on idiosyncratic productivity arrives. Our secondary markets incorporate bilateral trade with search, bargaining and liquidity frictions.

In this article, author Michel Rochette of the Bank's Risk-Management Unit briefly describes the initiatives undertaken to identify, analyze, model, and manage the principal risks inherent in the transactions of the Exchange Fund Account (EFA), where the international reserves of the federal government are held. The author focuses on five types of risk: credit risk, market risk, liquidity risk, operational risk, and legal risk. In addition, the author presents the risk-management principles underlying the activities of the EFA and the governance structure of the Account.

In the last half-year, the economic expansion in Canada has become well established, supported by low inflation, highly stimulative monetary conditions, and a strong U.S. economy.