Staff research

Canada’s economic prosperity depends on trade. But global maritime shipping networks have been reshaped in ways that have reduced Canada’s relative connectivity and carrying capacity. This less-central role for the country could mean greater exposure to supply chain disruptions that could increase the cost of doing business.

Rising housing costs are leading to an increasing share of first-time homebuyers seeking financial support from their parents. Specifically, Canada has experienced a noticeable rise in instances of parents co-signing mortgages with their adult children. This practice allows buyers to purchase more expensive homes—but it can also make both parties vulnerable to financial disruptions.

As the economy emerges from a crisis, macroeconomic policy confronts a dilemma: a protracted stimulus can foster a more inclusive labor market recovery, yet risks igniting inflation that ultimately undermines workers’ welfare through real income erosion. This tension amplifies in the presence of the ZLB and aggregate capacity constraints. We embed this insight into a quantitative model of the US economy.

This note finds evidence of a positive and nonlinear relationship between mortgage interest costs (MIC) and rental inflation: the impact of MIC on rents is small when population growth is near its historical norm, but significantly stronger during periods of rapid population growth.

Recessions feature elevated uncertainty. We develop a nonlinear imperfect-information New Keynesian model where procyclical information quality generates endogenous countercyclical uncertainty and precautionary saving. This demand channel can overturn the inflationary impact of negative supply shocks, making them deflationary, unless monetary policy stabilizes the output gap.

The words central banks use to explain policy decisions matter. They can, in some cases, affect financial markets just like changes in policy interest rates do. For this reason, we built a tool to track the tone of the Bank of Canada’s policy communications and assess how tone affects market perceptions.

DeFi lending with proper governance is operationally viable, but it also faces constraints related to capital efficiency, liquidation risk, and systemic fragility within the crypto ecosystem.

In Canada and abroad, yields on long-term government bonds have stayed high even as policy interest rates have fallen. This is due to rising term premiums―the extra compensation investors demand for holding these bonds. A key factor driving higher term premiums is global concerns about the ability of markets to absorb substantial amounts of government debt.

Mortgage debt represents over 70% of all Canadian household financial liabilities, and the performance of these debts is critical to the health of the financial system. We explore the relationships between mortgage arrears and key macroeconomic fundamentals such as labour market variables, interest rates, house prices and inflation. We then develop a framework to assess future household mortgage stress.

This analytical paper examines the organization of Government of Canada bond dealing. We focus on dealers’ hedging and funding practices, the market infrastructures that support those practices, and trading costs across the yield curve. This paper builds on earlier work discussing Canada’s fixed-income market: "Government of Canada Fixed-Income Market Ecology."