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Non-bank financing provides an important funding source for the economy and is a valuable alternative to traditional banking. It helps enhance the efficiency and resiliency of the financial system while giving customers more choices for their financial services. Unlike banking, it is not prudentially regulated.

I develop a population-based Markov chain Monte Carlo algorithm known as parallel tempering to estimate dynamic stochastic general equilibrium models. Parallel tempering approximates the posterior distribution of interest using a family of Markov chains with tempered posteriors.

The Canadian fixed-income market is in the midst of a structural transformation similar to those occurring in other national financial markets around the world. The authors examine recent developments and trends in the market and discuss their possible effects. The simultaneous shrinking of the federal government's financial requirements and steady rise in issues of corporate securities have significantly altered the composition of Canada's fixed-income market. Government of Canada securities constitute a predominant portion of outstanding fixed-income securities and play a pivotal role, serving as benchmarks for the valuation of other traded securities and as a hedging vehicle for market participants trying to control their exposure to risk. The reduced issuance of federal government securities has contributed to a decline in the liquidity of the benchmark market. This raises broader issues regarding the future of the Canadian fixed-income market, since the corporate market is still fairly underdeveloped and illiquid compared with that for Government of Canada issues. There are thus currently few benchmark and hedging alternatives. The federal government is, however, committed to preserving the integrity of the market for benchmark issues and is adopting initiatives to enhance market liquidity and alleviate some of the pressures on the effective supply of these securities. Another evolving trend in the market is the emergence of electronic trading platforms. These platforms have the potential to facilitate the price-discovery mechanism, increase cost efficiency, and improve the liquidity and transparency of the market.

Growth has slowed in many emerging-market economies (EMEs) since the 2007–09 global financial crisis, reflecting both cyclical and structural factors. In this context, it will be in-creasingly important for EMEs to raise potential growth by maintaining steady progress on structural reforms. How do structural reforms generally support growth? What are the re-form priorities for EMEs over recent history and today? Finally, what will be the impact of planned structural reforms on potential output growth among the world’s larger EMEs? These are some of the questions considered by the authors.

Canada’s financial system is resilient. Overall, households, businesses, banks and non-bank financial intermediaries successfully weathered the pandemic, a period of elevated inflation, and sharp increases in interest rates. But the trade war currently threatens the Canadian economy and poses risks to financial stability.

This monthly newsletter features the latest research publications by Bank of Canada economists including external publications and working papers published on the Bank of Canada’s website.

We estimate a model of households in Norway with bequest motives, health-dependent utility, and uncertain longevity and health. Our estimates imply strong bequest motives for households both with and without offspring. We interpret this as suggestive evidence that utility from residual wealth represents forces beyond an altruistic bequest motive.

We introduce a new approach for the estimation of high-dimensional factor models with regime-switching factor loadings by extending the linear three-pass regression filter to settings where parameters can vary according to Markov processes.

Today, I will talk about two types of global economic imbalances. The first relates to the way that savings and investment are being distributed across countries in an increasingly uneven way. The second is the possibility that, over the next couple of decades, the global economy might face a protracted period in which desired savings exceed planned investment, partly because of demographic trends.

Senior Deputy Governor Tiff Macklem discusses some of the challenges facing the private and public sectors as they manage risk in the new global economic landscape.