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This article examines four indicators of balance-sheet risks—leverage, capital, asset liquidity and funding—among different types of financial institutions in Canada over the past three decades. It also discusses relevant developments in the banking sector that could have contributed to the observed dynamics. The authors find that the various risk indicators decreased during the period for most of the non-Big Six financial institutions, but remained relatively unchanged for the Big Six banks. In addition, the balance-sheet risk indicators became more heterogeneous across financial institutions. The observed overall decline and increased heterogeneity follow certain regulatory changes, such as the introduction of the liquidity guidelines on funding in 1995 and the implementation of bank-specific leverage requirements in 2000. Given that these regulations required more balance-sheet risk management, they have likely contributed to the increased resilience of the banking sector.

Trends in debt issuance have changed significantly over the past decade, both prior to the financial crisis and subsequently.

This article begins with a brief examination of the Canadian mortgage market, focusing on the market’s evolution following changes to the Bank Act in 1992, which allowed chartered banks to enter the trust business, and the subsequent entrance of virtual banks and mortgage brokers.

A series of major international financial crises in the 1990s, and the recent introduction of the euro, have renewed interest in alternative exchange rate systems. The choice of exchange rate regime is particularly relevant for emerging-market countries because other countries are perceived either as having no alternative to their current exchange rate arrangement or as highly unlikely to change. This article examines the evolution of exchange rate regimes in emerging markets over the past decade and compares the strengths and weaknesses of the various available systems. These include intermediate regimes, such as the adjustable pegged exchange rate popular throughout much of the post—war period, and the two extreme exchange rate regimes: permanently fixed or freely floating exchange rate regimes. Two recently proposed alternatives are also evaluated: the Managed Floating Plus and Baskets, Bands, and Crawling Pegs. Both try to combine the best elements of the flexible and fixed exchange rate systems, but the Managed Floating Plus is deemed to be the more promising alternative.

This paper develops and estimates a model of firm-level fixed capital investment when firms face borrowing constraints.

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.

I chose to speak about globalization at the outset of my tenure because it will continue to be one of the forces shaping our economy and economic policy for years to come. Steady advances in transportation, communication, and information technologies, underpinned by the more widespread adoption of free-market economic policies, are shrinking the globe and expanding the global economy.

We provide empirical evidence of effects to the aggregate economy from surprises about financial intermediaries’ net worth based on a high-frequency identification strategy. We estimate that news of a 1% decline in intermediaries’ net worth leads to a 0.2%–0.4% decrease in the market value of nonfinancial firms.

I examine the impact of non-regulated lenders in the mortgage market using a dynamic stochastic general equilibrium (DSGE) model. My model features two types of financial intermediaries that differ in three ways: (i) only regulated intermediaries face a capital requirement, (ii) non-regulated intermediaries finance themselves by selling securities and cannot accept deposits, and (iii) non-regulated intermediaries face a more elastic demand.

This report provides a detailed technical description of a stress test model for investment funds called Ceto.