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Bank of Canada Governor Stephen S. Poloz discusses the structural damage to the Canadian economy caused by the crisis, and the need to rebuild Canada’s economic capacity and strengthen business confidence.

We study the short-run effects of monetary policy using a search-theoretic monetary model in which agents are subject to idiosyncratic shocks and aggregate monetary shocks.

This paper looks at the role mortgage brokers play in helping borrowers generate quotes and qualify for credit. We find that, on average, borrowers that engage with a mortgage broker pay lower interest rates. However, in about 15% of cases, borrowers are steered towards longer amortizing mortgages than they would have chosen absent a broker. Since mortgages with longer amortization have higher total interest costs over the entire life of the mortgage, this steering is expensive.

The Canadian corporate bond market has experienced a renaissance, in recent years, against a background of low inflation, reduced public borrowing, and the lowest levels of long-term interest rates in a generation. The authors examine the influences shaping the market and also compare the Canadian market with those of other countries. The increased level of activity in the market has been accompanied by the development of new products and by greater investor interest in instruments with higher returns and higher credit risk. A more dynamic Canadian corporate bond market is a welcome development since it offers borrowers an alternative source of funds, especially companies that have typically relied on the banking system and on the U.S. corporate bond market for financings involving higher levels of credit risk.

We present core findings from the 2024 Methods-of-Payment Survey, highlighting results from both the survey questionnaire and three-day shopping diary. Although cash holdings have increased in nominal terms, we find that cash usage remains unchanged since 2020. Mobile and other alternative payment methods continue to grow in importance.

Carbon dioxide emissions have been commonly modelled as rising and falling with total output. Yet many factors, such as energy-efficiency improvements and shifts to cleaner energy, can break this relationship. We evaluate these factors using US data and find that changes in energy efficiency of consumption goods explain a significant proportion of emissions fluctuations. This finding also implies that models that omit energy efficiency likely overestimate the trade-off between environmental protection and economic performance.

In the spring survey, a number of indicators eased from their level in the winter survey. While the weaker U.S. economic situation is weighing more heavily on the outlook, firms are not expecting a marked change in the pace of business activity.

Businesses remain positive about the economic outlook, although some forward-looking indicators have eased from the levels recorded in recent surveys, and the strength in commodity prices has raised expectations for costs and inflation.

Erratum: Please note that the legend for Chart 9 (French version only) should read as follows: au-dessus de 3 % , rather than au-dessous de 3 %

Governor Stephen S. Poloz talks about slowing international trade growth and the implications for productivity and the global economy.

I quantify the importance of changes in household preferences on household inflation rates using 11 years of scanner data for 11,000 US households. My results suggest that changes in household preferences are an important driver of inflation dynamics at the household level.