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This issue of the Financial System Review reflects the Bank’s judgment that household indebtedness and housing market imbalances–the most important vulnerabilities for the Canadian financial system–have moved higher over the past six months. However, the financial system remains resilient, and macroeconomic conditions continue to improve. Other vulnerabilities discussed in this FSR are fragile fixed-income market liquidity and the capacity of an interconnected financial system to mitigate cyber threats.

Quarterly Financial Report - First Quarter 2017 - For the period ended 31 March 2017

This report describes a joint endeavour between public and private sectors to explore a wholesale payment system based on distributed ledger technology (DLT). They find that a stand-alone DLT system is unlikely to be as beneficial as a centralized payment system in terms of core operating costs; however, it could increase financial system efficiency as a result of integration with the broader financial market infrastructure.

Digital technologies—cloud computing, the Internet of Things, advanced robotics, big data analytics, artificial intelligence and machine learning, social media, 3D printing, augmented reality, virtual reality, e-money and distributed ledgers—are transforming the way busi-nesses operate. How does this transformation compare with past industrial revolutions? How are digital technologies changing production systems across industries? Agile firms that use knowledge intensively and have high levels of both organizational and human capital appear set to realize the greatest benefits from digitalization. Finally, what are the implications for productivity, labour markets, inflation and monetary policy as we transition to the digital economy?

Some suggest the global economy is facing a fourth industrial revolution. Bank researchers discuss the possible implications of digitalization on the economy. This issue also shares insights on the effectiveness of some unconventional monetary policies in a small open economy, how Government of Canada bonds are used throughout their life cycle, as well as how the Big Six Canadian banks choose their funding strategies and why. The final article examines the slow growth in business investment.