Search

Narrow Money—Transactions Money The growth rate of the narrow monetary aggregates picked up in 1999, reflecting the expansion in economic activity and the stabilization of interest rates. The sharp acceleration of the narrow aggregates in recent months suggests buoyant growth in GDP in coming quarters. Signs of a possible rise in inflation are also emerging. Over the longer run, for inflation to remain in the Bank's 1 to 3 per cent target range, the growth of narrow money would have to slow down from its current pace. In 1999, the growth rate of M1 also began to converge with that of the other narrow aggregates, M1+ and M1++. This suggests that the influence of the special factors that have been affecting the growth rate of M1 has diminished. Broad Money—"Store of Value" Household savings represent deferred consumption, and therefore the broad monetary aggregate provides information about future spending and, hence, inflation. In 1999, the very broad measure of money, M2++, grew at much the same rate as it did in 1998. This outcome is in line with inflation remaining in the inflation-control target range over the next couple of years.

We model how securities dealers respond to regulations on leverage, position and liquidity such as those imposed by the Basel III framework. We show that while asset prices exhibit greater price impact, bid-ask spreads do not change and trading volumes may even increase.

The Bank of Canada’s current suite of models faces challenges in addressing network effects that integrate household and firm-level heterogeneity and their behaviours. We develop CANVAS, a Canadian behavioural agent-based model to contribute to the Bank’s next-generation modelling effort. CANVAS improves forecasting performance and expands capacity for model-based scenario analysis.

This paper presents updated estimates of potential output growth for the global economy through 2022. Global potential output growth is expected to decline sharply in the aftermath of the COVID-19 pandemic and recover partially by the end of the projection horizon of the October 2020 Monetary Policy Report.

This paper studies, theoretically and empirically, the unintended consequences of mandatory retention rules in securitization. It proposes a novel model showing that while retention strengthens monitoring, it may also encourage banks to shift risk.

We develop a model to analyze the link between financial leverage, worker pay structure and the risk of job termination. Contrary to the conventional view, we show that even in the absence of any agency problem among workers, variable pay can be optimal despite workers being risk averse and firms risk neutral.

We study whether the credit derivatives of firms reflect the risk from climate transition. We find that climate transition risk has asymmetric and significant economic impacts on the credit risk of more vulnerable firms, and negligible effects on other firms.

In complex and interconnected banking systems, counterparty risk does not depend only on the risk of the immediate counterparty but also on the risk of others in the network of exposures.

Using highly disaggregated transaction-level trade data, we document the importance of new firm-level trade partner relationships and the addition of new products to existing relationships in driving aggregate trade flows.

Given that China accounts for about half of global copper consumption, it is reasonable to expect that any significant change in Chinese copper consumption will have an impact on the global market.