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We present a new corporate default model, one of the building blocks of the Bank of Canada’s bank stress-testing infrastructure. The model is used to forecast corporate loan losses of the Canadian banking sector under stress.

In this issue, Bank staff discuss recent developments in experimental macroeconomics, research results on price-level and unemployment thresholds in forward guidance, and the spillover effects of quantitative easing in advance economies. Articles also explore the competitiveness strategies of Canadian firms as well as their use of financial derivatives.

Since 1983, the Bank of Canada has conducted a triennial survey of foreign exchange market activity in Canada. The latest survey was done in April 1995 and covered activity in both the foreign exchange market and in the derivatives markets. The central banks of most other industrialized countries with active foreign exchange and derivatives markets also conducted similar surveys. This was the first time that markets for over-the-counter (OTC) derivatives were surveyed by central banks in a systematic and comprehensive fashion. The average daily turnover in the Canadian foreign exchange market, including foreign exchange derivatives, has continued to grow rapidly (by approximately 36 per cent to about U.S.$30 billion) since the last survey, although at a slower pace than during the 1980s. Foreign exchange and interest rate derivatives contracts dominate derivatives market activity, with equity and commodity derivatives activity being almost negligible in comparison. Through April 1995, daily turnover volume in Canadian foreign exchange and interest rate derivatives markets averaged about U.S.$19 billion and U.S.$15 billion, respectively, mostly in forward and swap transactions.

This article first outlines the activities of the Bank's regional offices and looks at how regional economic analysis fits into the Bank's decision-making process. The changing role of the regional offices in communications and in information gathering is examined, focusing on the quarterly surveys of industries and associations. The second section reviews, from a regional perspective, economic developments since the Asian crisis and future prospects.

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.

Governor Mark Carney discusses how global liquidity cycles affect financial stability and economic growth, and what policy can do about it.

Globalization is in retreat, yet digitalization is on the rise. How will these trends impact inflation?

The results of the autumn survey suggest that, in an environment of slow global economic growth and uncertainty about demand, firms have tem¬pered their expectations for business activity.

We consider the effects of protectionist trade policies on international and domestic market integration, using evidence from the long-standing softwood lumber trade dispute between Canada and the United States.

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.