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There is a large body of literature that studies the relationship between financial structure (that is, the degree to which the financial system is either market- or intermediary-based) and long-run economic growth.

In a recent article, Faust and Leeper (1997) discuss reasons why inference from structural VARs identified with long-run restrictions may not be reliable. In this paper, the authors argue that there are reasons to believe that Faust and Leeper's arguments are not devastating in practice. First, simulation exercises suggest that this approach does well when […]

The issue addressed in this article is the extent to which monetary policy in Canada should respond to asset-price bubbles. The article concludes that maintaining low and stable consumer price inflation is the best contribution that monetary policy can make to promoting economic and financial stability, even when the economy experiences asset-price bubbles. In extreme circumstances—when an asset-price bubble is well identified and likely to have significant costs to the economy when it bursts—monetary policy might better maintain low and stable consumer price inflation by leaning against a particular bubble even though it may mean that inflation deviates temporarily from its target. Such a strategy might reduce the risk that a crash in asset prices could lead to a recession and to inflation markedly below target in the longer run. The circumstances where this strategy is possible will be rare because economists are far from being able to determine consistently and reliably when leaning against a particular bubble is likely to do more harm than good. Housing-price bubbles should be a greater concern for Canadian monetary policy than equity-price bubbles, since rising housing prices are more likely to reflect excessively easy domestic credit conditions than are equity prices, which are largely determined in global markets.

An important issue in the debate over the desirability of freer capital mobility for developing countries is whether capital flows have significant effects on economic growth. Proponents of capital account liberalization cite the growth-promoting attributes of capital inflows as a key benefit of financial integration for developing countries.

We discuss the payment habits of Canadians both in the current payment environment and in a hypothetical cashless environment.

The rise in inflation in 2021–22 sparked a growing literature and debate over the causes of the surge as well as the near- and medium-term path for inflation. This review offers three key messages.

The authors analyze the extent to which inflation-targeting frameworks should incorporate flexibility in order to respond to asset-price misalignments and other atypical events. They examine the costs and benefits of adding flexibility to the Bank's current inflation-targeting framework, and conclude that maintaining low and stable consumer price inflation is the best contribution that monetary policy […]

Commodity-equity and cross-commodity return co-movements rose dramatically after the 2008 financial crisis. This development took place following what has been dubbed the “financialization” of commodity markets.

This paper surveys the empirical literature on the benefits of low inflation, emphasizing contributions since 1990. It follows the framework of a section in the Bank's 1990 Annual Report, "The benefits of price stability."

A number of questions can arise when considering the implications of a cashless society. This note considers whether cash is necessary for a uniform currency.