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This article focusses on a key component of the federal government's debt-management program, Government of Canada marketable bonds. It first provides a broad overview of the characteristics of these bonds and then discusses the workings of the domestic market, from the formulation of a debt-management strategy to the primary issuance of the bonds, the delivery and payment process, and transactions in the secondary market. Recent developments that have enhanced the overall efficiency of the market are also examined. This article is part of a series that describes and analyses features of the Canadian financial sector.

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.

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The artefacts on the cover are part of the National Currency Collection of the Bank of Canada.

Photography by Gord Carter

Flood, Morin, and Kolet examine the role of house prices in household consumption decisions. Considering a group of advanced economies, the authors find that the strength of the link between house prices and consumer spending depends on the institutional features of national mortgage markets.

In 2014, inflation remained very close to target, the economy grew at a reasonable pace and there was no material increase in financial stability risks. Nonetheless, the economy still struggled against significant global headwinds. The 2014 Annual Report highlights the Bank of Canada’s key activities and achievements over the year, including a message from Governor Stephen S. Poloz, Management’s Discussion and Analysis, and the 2014 Financial Statements.

There has recently been considerable discussion about the ability of inflation to facilitate the adjustment of prices and wages and thus enhance economic performance. The discussion centres on whether wages are downwardly rigid. Wages are said to be downwardly rigid if it is difficult for the wages of some workers to fall despite underlying supply and demand pressures for decreases. Some authors have suggested that if downward nominal wage rigidity is prevalent it would be desirable to select a positive rate of inflation as the target for monetary policy. In this article, the authors evaluate the wage-rigidity hypothesis. They first examine the empirical evidence to assess whether the degree of downward rigidity is significant in Canada. They then analyze some key assumptions of the wage-rigidity hypothesis and its implications for employment. They also look at the empirical evidence on whether the combination of downward wage rigidity and low inflation has reduced employment.

A year of financial market strains and economic disruption in 2009 gave way to initial signs of progress in 2010, the year the Bank of Canada celebrates its 75th anniversary. The lessons of the past year vividly illustrate what the Bank has demonstrated repeatedly through seven and a half decades: the value of well-researched policy frameworks and decisive action.

This paper quantifies the contribution of sector-specific supply and demand shocks to personal consumption expenditure (PCE) inflation. It derives identification restrictions that are consistent with a large class of dynamic stochastic general equilibrium models with production networks.

In the past few years, many have postulated that the possible disinflationary effects of digitalization could explain the subdued inflation in advanced economies. In this note, we review the evidence found in the literature. We look at three main channels.