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We study the degree to which China’s 11th Five-Year Plan softens trade-offs between emissions and output. Our model suggests efficient regulation could have further increased aggregate productivity by 3.5% and output by 4.7% without any increase in aggregate emissions.

Today, I would like to talk about some of the important issues and challenges facing monetary policy in the period ahead and how the Bank of Canada proposes to deal with them. This is not an unusual topic for me since the business of central banking is seldom without challenges. But what a difference the past two years have made to the challenges we face!

Feedback rules are rules aimed at guiding policy-makers as they face the problem of keeping inflation close to a desired path without causing variability elsewhere in the economy. These rules link short-term interest rates, controlled by the central bank, to the rate of inflation and/or its deviation from a target rate. The authors describe the most popular types of feedback rules and review some simulation results.

It is always a pleasure to return and speak to people in my home province. This time, we are here for a meeting of the Bank of Canada's Board of Directors. Once a year, our Board meets outside Ottawa, in a different part of the country. This year, we are delighted to be in Regina.

We introduce generalized autoregressive gamma (GARG) processes, a class of autoregressive and moving-average processes in which each conditional moment dynamic is driven by a different and identifiable moving average of the variable of interest. We show that using GARG processes reduces pricing errors by substantially more than using existing autoregressive gamma processes does.

How do banks' interconnections in the euro area contribute to the vulnerability of the banking system? We study both the direct interconnections (banks lend to each other) and the indirect interconnections (banks are exposed to similar sectors of the economy). These complex linkages make the banking system more vulnerable to contagion risks.

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.

Changes in domestic interest rates affect the value of the Canadian dollar less than changes in the risk premium do. These variations often occur when a broad shift in risk sentiment occurs in global markets. Ultimately, the value of the currency reflects long-term, slow-moving features of the economies.

In this article, the author reviews the factors behind the recent evolution of liquidity in the market for Government of Canada (GoC) securities. He finds that liquidity has been supported by changes in the structure of the market, notably the introduction and increasing size of benchmark bond issues. He also notes that while the GoC bond market has generally benefited from changes in market structure, liquidity in the treasury bill market has decreased since the mid-1990s, largely because of the declining supply of these securities. This article also presents some comparisons of liquidity in the government securities markets of other industrialized countries and finds that liquidity in the Canadian market appears to compare favourably with all but the large U.S. Treasury market.

How do central bank crisis interventions calm market fears? Using options data, we measure the perceived risk of large asset price drops across horizons from two weeks to ten years. Studying the Fed's response to the 2020 turmoil, we find asset purchases reduce short-term fears while interest rate actions shape long-term expectations.