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Measures of core inflation enable a central bank to distinguish price movements that are transitory and generated by non-monetary events from those that are more permanent and related to prior monetary policy decisions.

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.

Existing literature documents that house prices respond to monetary policy surprises with a significant delay, taking years to reach their peak response. We present new evidence of a much faster response.

The authors use the efficient hedging methodology for optimal pricing and hedging of equity-linked life insurance contracts whose payoff depends on the performance of several risky assets.

This article examines four indicators of balance-sheet risks—leverage, capital, asset liquidity and funding—among different types of financial institutions in Canada over the past three decades. It also discusses relevant developments in the banking sector that could have contributed to the observed dynamics. The authors find that the various risk indicators decreased during the period for most of the non-Big Six financial institutions, but remained relatively unchanged for the Big Six banks. In addition, the balance-sheet risk indicators became more heterogeneous across financial institutions. The observed overall decline and increased heterogeneity follow certain regulatory changes, such as the introduction of the liquidity guidelines on funding in 1995 and the implementation of bank-specific leverage requirements in 2000. Given that these regulations required more balance-sheet risk management, they have likely contributed to the increased resilience of the banking sector.

Traditional structural models cannot distinguish whether changes in activity are a function of altered expectations today or lagged responses to past plans. Polynomial-adjustment-cost (PAC) models remove this ambiguity by explicitly separating observed dynamic behaviour into movements that have been induced by changes in expectations, and responses to expectations, that have been delayed because of adjustment costs.

While the service sector has been growing rapidly as a share of total output, aggregate productivity growth has generally lagged behind that of the goods sector. In this report, the author assesses a range of explanations for lagging service sector productivity growth.

We model how securities dealers respond to regulations on leverage, position and liquidity such as those imposed by the Basel III framework. We show that while asset prices exhibit greater price impact, bid-ask spreads do not change and trading volumes may even increase.

Differences in market structures may affect the manner in which fundamental information is incorporated into prices. High levels of quote and trade transparency plus substantial quoting obligations in European government securities markets ensure that prices are informationally efficient.