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We propose an open-economy New Keynesian model with financial integration that allows financial intermediaries to hold foreign long-term bonds. We study the implications of financial integration on monetary policy transmission. Among various aspects of financial integration, the bond duration plays a major role. These results hold for conventional and unconventional monetary policies.

In the April Monetary Policy Report, the Bank noted that inflation was well above its 2 per cent target and that short-term inflation expectations had edged up.

Most models in finance assume that agents make trading plans over the infinite future. We consider instead that they are boundedly rational and may only form forecasts over a limited horizon.

This is the second in a series of semi-annual reports designed to increase the transparency and understanding of Canadian monetary policy.

Should managers be paid in stock options if they provide stock-market participants with information about the firm? This paper studies how firm owners trade off the benefit of stock-price incentives and better-informed market participants against the cost of potential stock-price manipulation.

Proportional reduction is a common cartel practice in which cartel members reduce their output proportionately. We develop a method to quantify this reduction relative to a benchmark market equilibrium scenario and relate the reduction to the traditional conduct parameter.

Six months ago, at the time of the last Monetary Policy Report, the global economic and financial environment was volatile and highly uncertain because of the adverse situation in Asia and the fallout from the Russian debt moratorium.

The year that just passed posed many challenges for all Canadians. The slowdown in the global economy became more pronounced as the year went on, and this affected households, businesses, and governments alike. The tragedy of 11 September compounded the economic difficulties and issues facing us all. Through this period of rapidly changing circumstances, the Bank met its responsibilities by responding quickly and vigorously to events in order to underpin confidence and support the economy.

This paper examines how market-perceived AI exposure is associated with extreme financial-sector gains and losses across five markets, using Expected Shortfall and skewness decompositions to distinguish AI-sector, macroeconomic, systemic and financial scenarios.

Over the past year, Canada’s economy has outperformed the economies of virtually all the other major industrial countries.