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Globalization is the opportunity and the challenge of our age. It has the potential to lift billions out of poverty, vastly expand economic prospects, and develop a more diverse and resilient global economy.

The Bank expects Canada’s economy to grow by almost 4 percent on average in 2021 and 2022, following a decline of about 5 ½ percent in 2020.

Offline functionality is a key consideration for a potential CBDC. We describe the different types of offline functionality based on their duration outside of network connection—either intermittent (for short periods) or extended (for longer periods). We discuss the advantages and drawbacks of each and consider implications for end-user devices, system resilience and universal accessibility.

We present the R package MSTest, which implements hypothesis testing procedures to determine the number of regimes in Markov switching models. The package provides several testing frameworks, including Monte Carlo likelihood ratio tests, moment-based tests, parameter stability tests, and classical likelihood ratio procedures.

The Reports section of the Financial System Review examines selected issues of relevance to the Canadian and global financial systems. The June 2014 issue features three reports on financial system initiatives: making financial benchmarks more robust; implementing the stronger Basel III capital and liquidity framework for banks; and using stress tests to assess financial system risks.

Innovations in basic information technologies, in payment applications, and in the availability of global markets, as well as substantial changes in financial sector policy, have fundamentally changed how the retail payments system in Canada operates. Principally, the volume and types of electronic payments have grown, and there is increased participation by diverse groups of financial and non-financial institutions as providers of retail payment services. The resulting policy problem for payment systems is how best to benefit from efficiency gains while managing payment risks. O'Connor examines the effect of the technological and legislative changes and the initiatives developed by the public and private sectors in such areas as the market arrangements for services; customer risks and costs for settling large-value retail payments; the security of payment information and the efficiency with which it is transmitted; and the effects of differing regulatory regimes on competition among providers of retail payment services.

We analyze the interaction between committed monetary policy and discretionary fiscal policy in a model with public debt, endogenous government expenditures, distortive taxation and nominal rigidities.

The arrival of immigrants increases demand for housing and puts upward pressure on shelter prices. Using instrumental variables based on the ancestry composition of residents in US counties, we estimate the causal impact of immigration on local shelter prices.