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Dion examines the evolution of Canadian productivity since the mid-1990s, using the United States as a benchmark. During this period, trend productivity growth in Canada remained modest, whereas the U.S. witnessed a strong resurgence. Among the factors identified as potential root causes of Canada's lower productivity performance are a lower investment in information and communications technology, reallocation and adjustment costs associated with large relative price movements, and a weak demand for innovation.

This issue features a summary of the Bank’s annual conference, which took place in November 2011 and dealt with payments systems, and two articles that present research by Bank staff on global current account imbalances and macrofinancial risk assessment. The fourth article in this issue reviews the recent experience with inflation targeting.

Monetary policy can be implemented effectively without reserve requirements as long as cost incentives ensure a predictable demand for settlement balances. A central bank can then achieve the level of short-term interest rates that it desires, using market-oriented instruments only.

The article examines the extent of downward nominal wage rigidity in Canada and its implications for monetary policy. The authors ask whether its existence is a sufficient argument for a higher inflation target if concerns about the effective lower bound are adequately addressed.

To what extent does a central bank digital currency (CBDC) compete with bank deposits? To answer this question, we develop and estimate a structural model where each household chooses which financial institution to deposit their digital money with.

Domestic public debt issued by emerging markets has risen significantly relative to international debt in recent years. Some recent empirical evidence also suggests that sovereigns have defaulted differentially on debt held by domestic and external creditors.

The paper examines three equity-based structural models to study the nonlinear relationship between equity and credit default swap (CDS) prices. These models differ in the specification of the default barrier.

This paper examines the relationship between the term structure of interest rates and future changes in inflation for Canada using a newly constructed par-value yield series. The main conclusion of the empirical work is that the slope of the nominal term structure from 1- to 5-year maturities is a reasonably good predictor of future changes in inflation over these horizons.

This paper studies the formation of consumers’ inflation expectations using micro-level data from the Michigan Survey. It shows that beyond the well-established socio-economic determinants of inflation expectations such as gender, income or education, other characteristics such as the households’ financial situation and their purchasing attitudes also matter.

The authors test the statistical significance of Pindyck's (1999) suggested class of econometric equations that model the behaviour of long-run real energy prices.