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This paper surveys the recent literature on optimal currency areas (OCAs). Topics that are covered include theoretical developments in the context of general-equilibrium models and empirical work on shocks asymmetry and adjustment mechanisms. Issues relating to the endogeneity of OCA criteria, the role of exchange rate flexibility in promoting greater macroeconomic stability, and the links […]

The goal of Canadian monetary policy is to contribute to solid economic performance and rising living standards. The best way we can do this is by keeping inflation low, stable, and predictable. This has important implications for labour market performance.

We review the literature on central bank forecasting with a special focus on the Federal Reserve, European Central Bank, Bank of England and Bank of Canada.

We investigate the macroeconomic determinants of corporate spreads using a no-arbitrage technique. Structural shocks are identified by a New-Keynesian model. Treasury bonds are priced in an affine model with time-varying risk premia.

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.

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.

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.

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

Modelling term-structure dynamics is an important component in measuring and managing the exposure of portfolios to adverse movements in interest rates.

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.