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This article examines another strategy in the Bank's approach to dealing with an uncertain world: the use of carefully articulated models to produce economic forecasts and to examine the implications of the various risks to those forecasts. Economic models are deliberate simplifications of a complex world that allow economists to make predictions that are reasonably accurate and that can be easily understood and communicated. By using several models, based on competing paradigms, the Bank minimizes policy errors that could result from relying on one view of the world and one philosophy of model design. The authors review some of the models currently used at the Bank, as well as the role of judgment in the projection process.

Senior Deputy Governor Carolyn Wilkins discusses the financial stability risks associated with slow growth and low interest rates, and explores strategies to mitigate them.

The paper studies the determinants of being unbanked in the euro area and the United States as well as the effects of being unbanked on wealth accumulation. Based on household-level data from The Eurosystem Household Finance and Consumption Survey and the U.S. Survey of Consumer Finances, it first documents that there are, respectively, 3.6 per cent and 7.5 per cent of unbanked households in the two economies.

As the Government of Canada’s fiscal agent, the Bank of Canada provides strategic policy advice on the management of the government’s debt, in addition to being responsible for conducting debt-management operations. In this article, the authors review the evolution of the debt strategy over the past 20 years and outline the complex process of developing a sound strategy that balances various cost and risk considerations. This includes an examination of the tools and practices used to develop the new medium-term debt-management strategy, such as the modelling approach involved, market consultations and various debt-management metrics.

We discuss the competition and innovation arguments for issuing a central bank digital currency (CBDC). A CBDC could be an effective competition policy tool for payments. A CBDC could also support the vibrancy of the digital economy. It could help solve market failures and foster competition and innovation in new digital payments markets.

Senior Deputy Governor Carolyn A. Wilkins discusses three areas in which work remains to be done to improve financial stability.

The primary focus of this paper is to study conflict of interest in the brokerage market. Brokers face a conflict of interest when the commissions they receive from investors differ from the costs imposed by different trading venues.

How much of a CBDC would Canadian households want to hold, and what design features of a CBDC would they care about?

There are indications that business dynamism has declined in advanced economies. In particular, firm entry and exit rates have fallen, suggesting that the creative destruction process has lost some of its vitality. Meanwhile, productivity growth has slowed. Some believe that lower entry and exit rates partly explain the weaker productivity growth.