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The authors examine the link between consumption and disaggregate wealth in Canada. They use a vector-error-correction model in which permanent and transitory shocks are identified using the restrictions implied by cointegration proposed by King, Plosser, Stock, and Watson (1991) and Gonzalo and Granger (1995).

Can regulators keep pace with banks’ creative regulatory workarounds? Our analysis unpacks the trade-offs between fixed regulations and crisis-triggered rules, showing that the latter are especially prone to circumvention—and can trigger larger, costlier bailouts.

Uncertainty about the level of future inflation adversely affects the economy because it distorts the savings and investment decisions of households and businesses. Since these decisions typically involve planning horizons of many years, the adverse effects from inflation uncertainty can be reduced by adopting a policy framework that makes future inflation more predictable over long time horizons. When the inflation-control target was renewed in May 2001, the agreement affirmed that monetary policy will be directed at moving inflation to the 2 per cent midpoint of the target range over a six-to-eight-quarter horizon. The author describes how this policy commitment increases the predictability of average inflation over periods longer than one year. This relationship is illustrated using the Canadian experience from the inflation-targeting period.

As an economist who worked as a banker for most of his career, Douglas Gibson brought an interesting perspective to public policy issues, to the relationship between government and business, and to the contribution of outside economists to government policies.

The author documents the use by Canadian banks of subordinated debt (SD) as a capital instrument.

Repeated interactions between borrowers and lenders create the possibility of dynamic pricing: lenders compete aggressively with low prices to attract new borrowers and then raise their prices once borrowers have made a commitment. We find such pricing patterns in the Canadian mortgage market.

The author examines recent trends in sterilized intervention among emerging-market economies, to determine the size and extent of this policy in relation to earlier periods of heavy reserve accumulation. He then analyzes whether the domestic costs and risks of substantial and prolonged sterilization are beginning to manifest themselves.

Funding structures affected the amount of financial stress different countries and sectors experienced during the spread of COVID-19 in early 2020. Policy responses targeting specific vulnerabilities were more effective at mitigating this stress than those supporting banks or the economy more broadly.

Canada has continued to lose market share in the United States since the Great Recession, beyond what our bilateral competitiveness measures (relative unit labour costs) would suggest.

The authors explore the usefulness of macroeconomic models in analyzing global economic developments by examining movements in commodity prices between July 2007 and July 2008. They use the Bank of Canada's version of the Global Economy Model and investigate the longer-term outlook for commodity prices by constructing two different, globally consistent, scenarios for emerging Asia.