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This special issue of the Review, “Lessons from the Financial Crisis,” examines the recent research on the role of liquidity in the financial system and on the public policy responses that aimed to restore stability to the financial system during the crisis and to foster economic recovery.

This note discusses insights from historical launches of new payment methods and related laboratory experiments on the potential adoption and use of a central bank digital currency in the Canadian context.

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Decimalization in Great Britain

The Victorian florin on the cover is part of the National Currency Collection of the Bank of Canada.

This issue features a summary of the Bank’s annual conference, which this year dealt with financial globalization, and three articles that present research by Bank staff on Canada’s mortgage market, the role of adverse selection in financial crises, and payment networks.

This article focuses on the role that loans backed by housing collateral play in amplifying housing booms and, more generally, procyclicality in the housing market. The author uses a model developed to include borrower and lender households, as well as a housing market, to examine the impact that altering the loan-to-value ratio (either permanently or countercyclically) might have on the volatility of house prices and mortgage debt.

Since the creation of Bitcoin in 2009, over 2,000 cryptocurrencies have been issued. We evaluate how well a cryptocurrency functions as a payment system.

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Chinese Coin Charms

The charms on the cover are part of the National Currency Collection of the Bank of Canada.

Photography by Gord Carter.

The Bank of Canada’s annual conference, held in October 2010, brought together leading researchers from universities and central banks around the world.

The research findings highlighted in this article suggest that firm-size differences play a significant role in explaining the productivity gap between Canada and the United States. The authors review factors that lead to a positive relationship between productivity and size and then look at Canadian evidence of this relationship at the firm level. They quantify the extent to which the change in Canadian productivity as well as the Canada-U.S. productivity differences can be accounted for by the change in the importance of large firms and identify several factors that play a role in determining average firm size and aggregate productivity.

In his speech entitled “How People Think and How it Matters,” delivered to the Canadian Association for Business Economics, Deputy Governor Jean Boivin reviews various ways people form expectations and how these affect monetary policy.