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Canada fared relatively well during the global crisis, as a result of good policy and, in retrospect, some good fortune, Bank of Canada Governor Mark Carney said today in a speech to the International Center for Monetary and Banking Studies in Geneva, Switzerland.

We propose a functional principal components method that accounts for stratified random sample weighting and time dependence in the observations to understand the evolution of distributions of monthly micro-level consumer prices for the United Kingdom (UK).

How much capital do banks need as a buffer to absorb severe shocks? By using historical stock market data, market-based stress tests help estimate the magnitude of capital buffers necessary to absorb severe but plausible shocks.

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.

Cash use for payments has been steadily decreasing in many countries, including Canada and Sweden. This might suggest an evolution toward a cashless society. But in Canada, cash in circulation relative to GDP has been stable for decades and has even increased in recent years. By contrast, the cash-to-GDP ratio in Sweden has been falling steadily. What has caused this difference? Are there lessons to be learned from comparing the Canadian and Swedish experiences?

The Montreal Exchange introduced futures contracts on 3-month Canadian bankers' acceptances, known as BAX, in 1988. In this article, the author explains the nature of this new instrument, which is bought and sold on the floor of the Exchange, and its role in hedging, speculation, and arbitrage. She briefly reviews the technical aspects of the market and explains the difference between BAX contracts and forward rate agreements. She also examines the market's rapid growth and its relationship to the market for treasury bills.

Monetary theory says that money is essential if it helps to achieve better incentive-feasible outcomes. We test this in the laboratory.

Deposit insurance protects depositors from failing banks, thus making insured deposits risk-free. When a deposit insurance limit is increased, some deposits that previously were uninsured become insured, thereby increasing the share of risk-free assets in households’ portfolios. This increase cannot simply be undone by households, because to invest in uninsured deposits, a household must first invest in insured deposits up to the limit. This basic insight is the starting point of the analysis in this paper.

Recent findings on the term structure of equity and bond yields pose serious challenges to existing models of equilibrium asset pricing. This paper presents a new equilibrium model of subjective expectations to explain the joint historical dynamics of equity and bond yields (and their yield spreads).

In the year and a half leading up to mid-2003, both employment and labour force participation increased at an unusually rapid pace compared to domestic economic activity. Gains in employment were unusually large, relative to output growth, compared to gains in total hours worked. This is explained by a faster rate of increase in the participation rate of the 55 and older age group, many of whom opted for part-time employment. This shift in the composition of employment contributed to a reduction in the length of the average workweek in 2002. As a result, labour input progressed at a rate that was markedly slower than for employment and more in line with its historical relationship to output growth. The authors anticipate that the 55 and older age group will continue to participate strongly in the labour force, but that as the economy rebounds and uncertainty diminishes, the cyclical component in the growth of part-time work should diminish and that of full-time employment increase. Employment growth should moderate in relation to output growth and there may be a cyclical rebound in labour productivity as total hours worked increases during the initial recovery in output growth.