Search

The level of government debt in Canada relative to gross domestic product has risen steadily since the mid-1970s. Canada has not been alone in experiencing rising government indebtedness, but in comparison to other countries, Canada's debt load is now distinctly on the high side. The author reviews some of the effects of rising government debt levels on macroeconomic performance and provides some calculations aimed at illustrating their possible long-run impact on the Canadian economy. His analysis, which is based on a model of the Canadian economy used at the Bank of Canada, suggests that higher levels of government debt reduce both the level of output and the share of output that is available for domestic consumption. The central policy implication is that there are substantial benefits to halting the rise in government debt and thus preventing further erosion of consumption opportunities.

In times of high uncertainty, governments often implement interventions such as bailouts to financial institutions. To use public resources efficiently and to avoid major spillovers to the rest of the economy, policy-makers try to identify which institutions should receive assistance.

This volume offers readers a behind-the-scenes look at the demanding world of bank note design, highlighting the beauty of Canada's bank notes and celebrating the engraver's art. Soft cover, 124 pages (2006).

This paper shows that regional disparities in house price growth are more pronounced during house price busts than during booms. To explain this observation we construct a two-region currency union model incorporating a housing sector and extrapolative belief updating regarding house prices. To solve the model, we propose a new method that efficiently handles extrapolative belief updating in a wide class of structural models.

Swings in inventory investment have traditionally played a major role in Canadian business cycles. However, advances in inventory-control techniques and the reduced uncertainty associated with lower inflation have enabled firms to manage their inventories much more tightly and effectively. This article examines recent developments in the management of non-farm business inventories in Canada at both the aggregate and the sectoral level and looks at implications for the role of inventories as a source of economic fluctuation.

What sources of financing do Indigenous-owned businesses in Canada use, and what are their expectations about prices, wages and inflation? We find Indigenous-owned firms are significantly less reliant on financial institutions as sources of financing compared with non-Indigenous firms. We also find Indigenous-owned firms have higher inflation expectations and weaker wage-growth expectations.

Real GDP growth is projected to average around 2 1/2 per cent over the next year before slowing to around 2 per cent in 2016.

The year that just passed posed many challenges for all Canadians. The slowdown in the global economy became more pronounced as the year went on, and this affected households, businesses, and governments alike. The tragedy of 11 September compounded the economic difficulties and issues facing us all. Through this period of rapidly changing circumstances, the Bank met its responsibilities by responding quickly and vigorously to events in order to underpin confidence and support the economy.

We develop and estimate a search model in which identical consumers trade with price-setting firms that differ in productivity. We use the estimated model to characterize the qualitative and quantitative differences in prices and markups across firms. We explore how individual firms respond to changes in cost and demand and how they pass these through to their prices and markup.

The Financial System Review concludes that the overall level of risk to Canada’s financial system is largely unchanged from six months ago. While household vulnerabilities have moved higher, the ongoing economic recovery in Canada means that the overall risk remains the same. The Bank highlights three vulnerabilities in the financial system: the elevated level of household indebtedness, imbalances in some regional housing markets and the fragility of liquidity in fixed-income markets.