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Recent years have seen renewed interest in the regulation of interbank markets. A review of the literature in this area identifies two gaps: first, the literature has tended to make ad hoc assumptions about the interbank contract space, which makes it difficult to generate convincing policy prescriptions; second, the literature has tended to focus on ex-post interventions that kick in only after an interbank disruption has come underway (e.g., open-market operations, lender-of-last-resort interventions, bail-outs), rather than ex-ante prudential policies.

The International Monetary Fund (IMF, or the Fund) has undergone a number of significant policy changes and reforms in the wake of the global financial crisis. Most notably, in December 2015, the United States approved long-delayed legislation to increase the representation of developing countries in the Fund’s governance structure.

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.

We show how Canadian mortgage debt dynamics can be modelled in a semi-structural macroeconomic model, such as the Bank of Canada’s LENS. The model we propose accounts for Canada’s unique mortgage debt structure.

This section of the Financial System Review examines the recent performance of the Canadian financial system and the factors, both domestic and international, that are influencing it.

The financial system, which consists of financial institutions, financial markets, and clearing and settlement systems, lays an important role in a nation’s economy. Sound and efficientfinancial systems can make a significant contribution to economic growth.

This paper provides a systematic, quantitative analysis of the short-run and long-run effects of various trade-restricting policies in the presence of global value chains and multinational production.

We study the trading of an asset with bankruptcy risk. The traded price of the asset is, on average, 40% of the expected total dividend payments. We investigate which economic models can explain the low traded price.

Using newly matched data on US defense contracts and restricted administrative employment data, we show that the employment effects of defense procurement are costly, concentrated and slow to diffuse.

At the onset of the pandemic, the Bank of Canada transitioned its framework for monetary policy implementation from a corridor system to a floor system, which it has since decided to maintain. We provide a comprehensive analysis of both frameworks and assess their relative merits based on five key criteria that define a sound framework.