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Inflation rates in advanced economies experienced two consecutive puzzles during the period following the global financial crisis—unexpectedly high inflation from the end of 2009 to 2011 and unexpectedly low inflation from 2012 to the middle of 2014. We investigate these developments in two ways. First, we show that accounting for inflation expectations by households explains a significant share of the inflation puzzles at the international level. Second, we find that, for Canada, elevated competition in the retail sector is also important for understanding inflation dynamics in the post-crisis period.

A blockchain is a digital ledger that keeps track of a record of ownership without the need for a designated party to update and enforce changes to the record. The updating of the ledger is done directly by the users of the blockchain and is traditionally governed by a proof-of-work (PoW) protocol.

This article discusses three scenarios for the adjustment of the global economy. In a “baseline” scenario—which encompasses fiscal consolidation in major advanced economies, growth-friendly structural reforms in Europe and Japan, and greater exchange rate flexibility and reforms in the emerging-market economies of Asia to induce rotation of demand away from net exports—global current account imbalances […]

This paper develops an economic framework to analyze the exchange rate of virtual currency. Three components are important: first, the current use of virtual currency to make payments; second, the decision of forward-looking investors to buy virtual currency (thereby effectively regulating its supply); and third, the elements that jointly drive future consumer adoption and merchant acceptance of virtual currency.

In this paper we explore the nexus between cross-border trade integration and monetary policy. We first review the evidence that trade liberalization has increased the degree of integration in North America and conclude that, while robust structural inferences remain elusive, there is sufficient supporting evidence for central banks to treat the issue seriously.

We expect global potential output growth to increase from 2.5% in 2022 to 2.8% by 2026. Compared with the April 2022 staff assessment, global potential output growth is marginally slower. The current range for the US neutral rate is 2% to 3%, unchanged from the last annual assessment.

This paper predicts phases of the financial cycle by using a continuous financial stress measure in a Markov switching framework. The debt service ratio and property market variables signal a transition to a high financial stress regime, while economic sentiment indicators provide signals for a transition to a tranquil state.

We propose an early warning model for predicting the likelihood of a financial stress event for a given future time, and examine whether credit plays an important role in the model as a non-linear propagator of shocks.

At the onset of the pandemic, the Bank of Canada transitioned its framework for monetary policy implementation from a corridor system to a floor system, which it has since decided to maintain. We provide a comprehensive analysis of both frameworks and assess their relative merits based on five key criteria that define a sound framework.