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In this paper, the author considers whether fundamentals or other factors can explain the yen's ongoing weakness. In particular, the importance of capital outflows due to the carry trade and longer-term portfolio investment outflows, which may be delaying the adjustment of the yen, are investigated. A simple portfolio model is developed, composed of a speculative […]

Using identification-robust methods, the authors estimate and evaluate for Canada and the United States various classes of inflation equations based on generalized structural Calvo-type models. The models allow for different forms of frictions and vary in their assumptions regarding the type of price indexation adopted by firms.

Consumers often express concerns about lack of privacy, but they still give up a lot of data to digital platforms. This paper builds a dynamic game-theoretic model of data collection and privacy protection, which potentially explains consumers’ behaviour.

The long-run relation between growth and inflation has not yet been studied in the context of nominal price and wage rigidities, despite the fact that these rigidities now figure prominently in workhorse macroeconomic models.

We conduct surveys to study how consumer spending responds to higher inflation expectations. Most respondents spend the same, sticking to fixed budget plans or not considering inflation for spending decisions. About 20% decrease spending because they feel poorer and cut spending to invest in inflation-proof assets. Very few increase spending.

Éric Chouinard and Graydon Paulin review the progress to date in implementing Basel III, the new framework of global regulatory standards for the banking sector developed by the Basel Committee on Banking Supervision. The report highlights the expected net benefits of implementing Basel III, as well as the challenges in ensuring international consistency in measuring the risk-weighted capital of banks. It includes a discussion on how implementing Basel III has affected the banking system in Canada and other important jurisdictions, and demonstrates the need for ongoing assessment of the effects on the financial system and the macroeconomy.

The prices of commodities produced in Canada have important implications for the performance of the Canadian economy and the conduct of monetary policy. The authors explain an important change to the methodology used to construct the Bank of Canada commodity price index (BCPI).

The COVID-19 pandemic significantly increased the demand for cash. Cash in circulation increased sharply from March through December 2020, particularly in the early months of this period. Although use of electronic methods of payment also increased significantly, cash use for payments remains high for low-value transactions and among certain demographic groups.

Relevant literature on asset-liability management (ALM) is reviewed and different ALM approaches are discussed that may be of interest to the Bank of Canada for the purpose of modelling the Exchange Fund Account (EFA).

We develop a model that links investors’ decisions to enter or exit the Bitcoin market with their beliefs about the survival of Bitcoin. Empirical testing using Canadian data reveals that beliefs strongly influence both entries and exits, and this impact varies with time and ownership status.