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Deputy Governor Timothy Lane explains how the Bank of Canada is preparing for a future where Canadians may need a digital currency issued by their central bank.

This issue features a summary of the Bank’s annual conference, which this year dealt with financial globalization, and three articles that present research by Bank staff on Canada’s mortgage market, the role of adverse selection in financial crises, and payment networks.

This 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.

Businesses remain essentially as optimistic about the economic outlook as they were in the summer survey. Although they have marked down their growth forecast for the U.S. economy, businesses expect stronger domestic demand.

Supplemental questions on the appreciation of the Canadian dollar - October 2004

The world economy and Canada have had to navigate some difficult straits in the past couple of years. But we have made it through. And considering the tide from the Asian financial crisis that washed around the world, the Canadian economy has coped better this time around than in the past.

Trade liberalizations increase the sales and input purchases of productive firms relative to their less productive domestic competitors. This reallocation affects firms’ market power in their product and input markets. I quantify how the labour market power of employers affects the distribution and size of the gains from trade.

Although there has been some improvement in conditions over the past several weeks, strains in global credit markets have broadened since December.

FSR Highlights - June 2008

Errata: Some factual errors in the June report "Bank of Canada Oversight Activities during 2007 under the Payment Clearing and Settlement Act" have been corrected. They concern (i) clarification of the U.S. Federal Reserve as lead overseer of CLS Bank and (ii) the steps taken by CDS on 14 August 2007 to assist issuers and participants holding defaulted ABCP.

I study how banking market concentration and reliance on wholesale funding affect monetary policy transmission to mortgage rates. I find that this transmission is imperfect and dampens the response of consumption, output, and housing prices.

In his speech, Price Puzzles and the Exchange Rate, Deputy Governor John Murray discusses the exchange rate pass-through and how it affects prices of goods and services in Canada.

Responses to the autumn survey indicate that the combination of weak U.S. demand, volatile financial markets, and slowing momentum in the West are weighing more heavily on business activity in Canada.