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We use relative value to measure limits to arbitrage in fixed-income markets. Relative value captures apparent deviations from no-arbitrage relationships. It is simple, intuitive and can be computed model-free for any bond.

The authors present the four common cyclical vulnerabilities that appear in financial systems, providing examples of qualitative and quantitative indicators used to monitor these vulnerabilities across different sectors. They also discuss other inputs to the vulnerability assessment and to the internal process used at the Bank of Canada for identifying, evaluating and communicating vulnerabilities and risks, and highlight some of the key challenges in assessing financial system vulnerabilities and risks.

This paper examines the effects of time-varying volatility on welfare. I construct a tractable endogenous growth model with recursive preferences, stochastic volatility, and capital adjustment costs.

The Bank of Canada continues to use the Bitcoin Omnibus Survey (BTCOS) to monitor trends in Canadians’ awareness, ownership and use of Bitcoin. The most recent iteration was conducted in late 2018, following an 85 percent decline in the price of Bitcoin throughout the year.

This paper analyzes the optimal quantity of central bank reserves in an economy where reserves and other financial assets provide liquidity benefits. Using a static model, I derive a constrained Friedman rule that characterizes the socially optimal level of reserves, demonstrating that this quantity is neither necessarily large nor small but depends on the marginal benefits of reserves relative to alternative safe assets.

Coholder households simultaneously carry high-cost credit card debt and low-yield cash. We study the implications of this behavior for fiscal and monetary policy, finding that coholder households have smaller consumption responses in the short run but larger responses in the long run.

We expect global potential output growth to increase from 2.7% in 2021 to 2.9% by 2024. Compared with the April 2021 assessment, global potential output growth is marginally slower. The current range for the US neutral rate is 2% to 3%, 0.25 percentage points higher than staff’s last assessment.

This paper proposes a theory of foreign reserves as macroprudential policy. We study an open-economy model of financial crises in which pecuniary externalities lead to overborrowing, and show that by accumulating international reserves, the government can achieve the constrained-efficient allocation.

We examine how demographic factors influence potential output, focusing on how the age distribution of the working-age population and the old-age dependency ratio affect aggregate productivity. Following Feyrer (2007), we emphasize that the contribution to aggregate productivity varies by age group, with middle-aged individuals (aged 40 to 49) being the most productive.

In this paper, we estimate the effect on housing prices of the expansion of the Vancouver SkyTrain rapid transit network during the period 2001–11. We extend the canonical residential sorting equilibrium framework to include commuting time in the household utility function.