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It is commonly observed that central banks respond gradually to economic shocks, moving the interest rate in small discrete steps in the same direction over an extended period of time. This paper examines the empirical evidence regarding central banks' smoothing of interest rates, paying particular attention to the case of Canada.

The persistence of both core and total consumer price index inflation in Canada has declined significantly since the 1980s. In addition to providing up-to-date estimates of inflation persistence, this article examines possible reasons for the decline suggested in the literature. The role played by monetary policy, through its effect on price- and wage-setting behaviour, is distinguished from possible changes to the structure of the economy that are independent of monetary policy. The authors also discuss the implications for monetary policy of low structural persistence in inflation, including the choice of an inflation-targeting regime versus a price-level-targeting regime.

We offer a multi-period systemic risk assessment framework with which to assess recent liquidity and capital regulatory requirement proposals in a holistic way.

How do firms adjust prices in the marketplace? Do they tend to adjust prices infrequently in response to changes in market conditions? If so, why? These remain key questions in macroeconomics, particularly for central banks that work to keep inflation low and stable.

The financial system makes an important contribution to the welfare of all Canadians. The ability of households and firms to confidently hold and transfer financial assets is one of the fundamental building blocks of the Canadian economy.

Can artificial intelligence (AI) think and act like a cash manager? In this paper we explore how generative AI agents can help manage liquidity, prioritize payments and optimize efficiency in real-time gross settlement systems.

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.

Governor Tiff Macklem talks about the COVID-19 pandemic and major economic forces are affecting the labour market, and the need for all groups to benefits from the recovery.

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.

The authors trace the development of the Basel III standards for banking regulation. Basel III builds on two earlier frameworks, in response to weaknesses revealed during the global financial crisis. They highlight how implementation of the standards will underpin greater financial stability and provide a sound foundation for economic growth.