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Can macroprudential foreign exchange (FX) regulations on banks reduce the financial and macroeconomic vulnerabilities created by borrowing in foreign currency? To evaluate the effectiveness and unintended consequences of macroprudential FX regulations, we develop a parsimonious model of bank and market lending in domestic and foreign currency and derive four predictions.

We compare the Federal Reserve’s asset purchase programs with those implemented by the Bank of England and the Swedish Riksbank, and the Swiss National Bank’s reserve expansion program.

We explain how the Bank of Canada’s policy models capture the trade-off between output and inflation in Canada. We provide new estimates of the trade-off and contrast them with those in the Bank’s macroeconomic models.

The five articles in this issue present research and analysis by Bank staff covering a variety of topics: the growth of Canadian-dollar-denominated assets in official foreign reserves; the emergence of platform-based digital currencies; methods of forecasting the real price of oil; measures of uncertainty in monetary policy; and the recent performance of the labour market in Canada and the United States.

Governor Mark Carney reviews the advantages of Canada’s flexible inflation-targeting regime.

This paper studies the implications of model uncertainty for wealth distribution in a tractable general equilibrium model with a borrowing constraint and robustness à la Hansen and Sargent (2008). Households confront model uncertainty about the process driving the return of the risky asset, and they choose robust policies.

Using almost two decades of detailed high-frequency data, we show how Canadian interest rates, the CAD/USD spot exchange rate, and stock market returns react to both US and domestic macro announcements. We find that Canadian macroeconomic announcements invoke greater responses in short-term yields, whereas US macroeconomic announcements play an increasingly important role in the yield movements of longer-term assets.

This paper introduces a subjective measure of cash accessibility in Canada, complementing existing distance-based metrics developed by Chen, O’Habib and Xiao (2023). Analyzing data from the 2023 Methods-of-Payment Survey, this study explores how Canadians perceive their ease of accessing cash from automated banking machines (ABMs) and financial institution branches.

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

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.