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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.

The Great Recession and current pandemic have focused attention on the constraint on nominal interest rates from the effective lower bound.

Model-based forecasts of important economic variables are part of the range of information considered for monetary policy decision making.

This paper outlines and assesses the various channels through which digitalization can affect prices of goods and services.

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.

Offshoring has become an increasingly prominent aspect of the globalization process. Evidence over the past two decades suggests that offshoring has not exerted a noticeable impact on overall employment and earnings growth in advanced economies, but it has likely contributed to shifting the demand for labour towards higher-skilled jobs. There appear to be some positive effects of offshoring on productivity, but such effects differ by country.

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Bus Transportation Tokens and Tickets

The pieces illustrated on the cover range in size from 12 mm to 38 mm in diameter or width. They form part of the National Currency Collection, Bank of Canada.

Photography by Gord Carter, Ottawa

Combining various high frequency financial data with central bank projections, I construct a new measure of monetary policy shocks not predictable by the public information preceding a central bank’s announcements. I then study the causal effects of monetary policy on the macro economy.

Price controls, or caps, can lead to shortages, as 1970’s gasoline price controls illustrate. One million trades show that the market for borrowing bonds in Canada has an implicit price cap: traders are willing to pay no more than the overnight interest rate to borrow a bond. This suggests the probability of a shortage increases when interest rates are very low.

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.