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A database of historical Government of Canada zero-coupon yield curves developed at the Bank of Canada is introduced in this article, which also includes an initial statistical analysis of the behaviour and evolution of the zero-coupon interest (spot) rates over the full period and two distinct subperiods. Specific areas of interest include the evolution of the levels of key interest rates and yield-curve measures over the sample as well as daily changes in the key interest rates and the yield-curve measures; the identification of a relatively small number of factors that drove the evolution of the yield curve; and the total returns that would have been realized by holding bonds of different maturities for a given holding period.

Foreign direct investment inflows are positively related to growth across developing countries—but so are savings in excess of investment. I develop an explanation for this well-established puzzle by focusing on the limited availability of consumer credit in developing countries together with general equilibrium effects.

Cash gives users a high level of privacy when making payments, but the use of cash to make payments is declining. People increasingly use debit cards, credit cards or other methods to pay.

This paper studies the effects of financial development, taking into account both formal and informal financing. Using cross-country firm-level data, we document that informal financing is utilized more by rich countries than poor countries.

Deputy Governor Lawrence Schembri discusses the importance of potential output to monetary policy, as well as policy challenges and opportunities in a world of low potential output growth.

Inflation dynamics in advanced countries have produced two consecutive puzzles during the years after the global financial crisis. The first puzzle emerged when inflation rates over the period 2009-11 were consistently higher than expected, although economic slack in advanced countries reached its highest level in recent history.

Senior Deputy Governor Carolyn Wilkins discusses the risks and opportunities for Canada of China’s economic transition.

We assess the implications of price indexation for estimated frequency of price adjustment in sticky price models of business cycles. These models predominantly assume that non-reoptimized prices are indexed to lagged or average inflation.

We use internationally comparable household-level data for ten euro area economies and the United States to investigate cross-country differences in debt holdings and the potential of debt overhang.

With increasing levels of household debt in recent years, the number of households that may be vulnerable to a negative economic shock is rising as well. Decisions made by both the debtor and the creditor can contribute to insolvency. This article presents some stylized facts about insolvency in Canada’s household sector and analyzes the role of creditors in insolvencies. The average debt of an individual filing for bankruptcy is more than 1.5 times that of an average Canadian household; bankruptcy filers tend to be unemployed or in low-wage jobs, and are typically renters. The article reports that banks that approve more loans per branch, which is interpreted as less-intensive use of soft information (such as the loan officer’s assessment of the applicant’s character), experience more client bankruptcies. This finding has important policy implications, because financial institutions that do not use soft information risk further deterioration in their lending portfolios.