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Some evidence points to the procyclicality of leverage among financial institutions leading to aggregate volatility. This procyclicality occurs when financial institutions finance their assets with non-equity funding (i.e., debt financed asset expansions). Wholesale funding is an important source of market-based funding that allows some institutions to quickly adjust their leverage.

This paper seeks to understand how outward foreign direct investment (FDI) affects the productivity of Canadian firms. We estimate the impact of outward greenfield investment on measures of firm-level productivity using FDI data from roughly 2,000 Canadian firms and more than 4,000 outward FDI projects over the 2003–14 period.

What makes e-money more special than cash? Is the introduction of e-money necessarily welfare enhancing? Is an e-money system necessarily stable? What is the optimal way to design an efficient and stable e-money scheme?

Currency crises in the 1990s, especially those in emerging markets, have sharply disrupted economic activity, affecting not only the country experiencing the crisis, but also those with trade, investment, and geographic links. The authors review the theoretical literature and empirical evidence regarding these crises. They conclude that their primary cause is a fixed nominal exchange rate combined with macroeconomic imbalances, such as current account or fiscal deficits, that the market perceives as unsustainable at the prevailing real exchange rate. They also conclude that currency crises can be prevented through the adoption of sound monetary and fiscal policies, effective regulation and supervision of the financial sector, and a more flexible nominal exchange rate.

This paper presents a model of an over-the-counter bond market in which bond dealers and cash investors arrange repurchase agreements (repos) endogenously.

This survey took place between August 2 and August 23, 2022. Follow-up interviews took place in September. Expectations for inflation one to two years ahead have continued to rise because consumers anticipate supply chain disruptions and elevated oil prices will persist. In contrast, expectations for inflation five years ahead have eased to near pre-pandemic levels. Still, consumers are more divided this quarter about where inflation will end up in the long term.

Deputy Governor Paul Beaudry discusses the macroeconomic lessons we’ve learned during the COVID-19 pandemic, and what lies ahead to bring inflation back to target.

Using industry-level data for 22 Canadian manufacturing industries, the authors examine the relationship between exchange rates and investment during the period 1981–97.

Dealers connect investors who want to buy or sell securities in financial markets. Over time, dealers and investors form trading networks to save time and resources. An emerging field of research investigates how networks form.

The network pattern of financial linkages is important in many areas of banking and finance. Yet bilateral linkages are often unobserved, and maximum entropy serves as the leading method for estimating counterparty exposures.