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We study the impact government expenditure has on inflation. We find that changes in government expenditure account for a substantial portion of inflation variations. We also find that inflation and inflation expectations respond negatively to fiscal spending shocks, reaffirming the supply-side channel through which inflation responds to fiscal expansions.

Central banks communicate the results of open market operations. This helps participants in financial markets more accurately estimate the prevailing demand and supply conditions in the market for overnight loans.

Central banks play a pivotal role in well-functioning payments systems by providing liquidity via collateralized lending. This article discusses the role of collateral and haircut policy in central bank lending, as well as the distinguishing features of the central bank’s policy relative to private sector practices. It presents a model that explicitly incorporates the unique role of central banks in the payments system and argues that central banks must consider how their haircut policies affect the relative price and liquidity of assets, the market’s asset allocation, and the likelihood of participants to default. Furthermore, under extraordinary circumstances, there is a rationale for the central bank to temporarily reduce haircuts or broaden the list of eligible collateral to mitigate the shortage of liquidity in the market.

This paper investigates how a low or negative overnight interest rate might affect the Canadian repo markets. The main conclusion is that the repo market for general collateral will continue to function effectively.

We propose an uncovered expected returns parity (URP) condition for the bilateral spot exchange rate. URP implies that unilateral exchange rate equations are misspecified and that equity returns also affect exchange rates. Fama regressions provide evidence that URP is statistically preferred to uncovered interest rate parity (UIP) for nominal bilateral exchange rates between the US dollar and six countries (Australia, Canada, Japan, Norway, Switzerland and the UK) at the monthly frequency.

Stock market fundamentals would not seem to meaningfully predict returns over a shorter-term horizon—instead, I shift focus to severe downside risk (i.e., crashes).

We draw on the Canadian experience to examine how monetary and macroprudential policies interact and possibly complement each other in achieving their respective price and financial stability objectives.

Across several dimensions of lender of last resort policy, I highlight broad changes that have occurred since the 2008–09 global financial crisis and discuss some of the key challenges, choices and considerations facing the designers of central bank liquidity tools today.

We assess how much the recent rate-hike cycle has and will affect mortgage borrowers' consumption through its impacts on mortgage payments. Our analysis provides insights into the effects of changes in monetary policy on the consumption of mortgage borrowers.