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Initial coin offerings (ICOs) are a new mode of financing start-ups that saw an explosion in popularity in 2017 but declined in popularity in the second half of 2018 as regulatory pressure, instances of fraud and reports of poor performance began to undermine their reputation.

Access to information about the future direction of the exchange rate can be extremely valuable in the foreign exchange market. Evidence presented in this article suggests that Canadian dealers are more likely to provide interday liquidity to foreign, rather than Canadian, financial customers, since foreign financial flows can be more informative about future movements in the exchange rate. The author reveals a statistical relationship between the supply of liquidity provided by non-financial firms and that provided by dealing institutions across time, and across markets, and suggests that the relationship between the positions of commercial clients and market-makers, and the role played by dealers in interday liquidity provision, has been understated in the market microstructure literature.

This paper examines the relationship between volatility shocks and preference shocks in an analytically tractable endogenous growth model with recursive preferences and stochastic volatility. I show that there exists an explicit mapping between volatility shocks and preference shocks, and a rise in volatility generates the same impulse responses of macroeconomic aggregates as a negative preference shock.

We show that changes in sentiment that aren’t related to fundamentals can drive persistent macroeconomic fluctuations even when all economic agents are rational. Changes in sentiment can also affect how fundamental shocks affect macroeconomic outcomes.

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The "pretended" Bank of Upper Canada — Kingston (1819-22)

The note is part of the National Currency Collection of the Bank of Canada.
Photography by Gord Carter

This background note explains the Bank’s official position on CBDC. It outlines the public policy, design, technology and risk management issues the Bank is considering as it builds its capacity to issue a CBDC in case it is needed in the future.

This issue focuses on the upcoming renewal of Canada’s inflation-control target. Bank researchers discuss the estimate of the lower bound to policy interest rates in Canada. They also discuss downward nominal wage rigidity and whether its presence warrants considering a higher inflation target. The third article highlights the experience some international central banks have had with unconventional monetary policies. The final article describes monetary policy frameworks in 10 advanced economies.

Shocks to a currency area can and often do have asymmetric impacts on its regions that, in the absence of perfect labour mobility, lead to gaps in relative labour market performance. Witness, for example, the effects of the 2008/09 recession and subsequent financial crisis in Europe on the dispersion of employment rates across the euro area – and to a lesser extent the United States.

The last few weeks have been a time of turbulence in financial markets. In times such as these, it is common for people to focus on day-by-day or even hour-by-hour events, and to lose sight of the future. But tonight, I want to focus on the future; specifically, the future of inflation targeting in Canada.