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In 2024, the Canadian Overnight Repo Rate Average (CORRA) rose 7 basis points above the Bank of Canada’s target overnight rate as settlement balances declined and hedge fund borrowing increased by $30 billion, straining dealers’ balance sheets. Exercising market power, dealers raised rates, and as client activity grew, these higher rates increasingly influenced CORRAs deviation from target.

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.

Canada is undertaking a major initiative to modernize its payments ecosystem. The modernized ecosystem is expected to bring significant benefits to Canadian financial markets and the overall economy. We develop an empirical framework to quantify the economic benefits of modernizing the payment system in Canada.

Merchants universally accept cash. Consumers widely hold cash but also carry debit and credit cards. The cost of using a method of payment has only a small influence on which method consumers use. Large merchants accept all payments, while only two-thirds of small and medium-sized businesses accept credit cards. Merchants report that credit cards are the costliest payment method compared with cash and debit cards. However, costs are not the only consideration. Merchant acceptance of credit accounts for the many con-sumers that want to use credit cards. This interaction between consumers and merchants is known as network externalities.

We consider the effects of protectionist trade policies on international and domestic market integration, using evidence from the long-standing softwood lumber trade dispute between Canada and the United States.

Deputy Governor Lawrence Schembri talks about the Bank’s latest interest rate announcement and discusses how COVID-19 has affected savings and the outlook household spending.

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.

We study how different types of monetary policy shape the distributional effects of external economic shocks on households’ consumption in a small open economy. Our results present a trade-off between maintaining overall stabilization and controlling consumption inequality.