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Interest rate swaps and currency swaps are contracts in which counterparties agree to exchange cash flows according to a pre-arranged formula over a period of time. Since 1985, the federal government has been using such swaps to manage its liabilities in a cost-effective and flexible manner. The authors outline the characteristics of swap agreements and the ways in which the government uses them. They show that the swap program has been cost-effective, estimating that past and projected savings exceed $500 million. The authors also discuss the methods that the government uses to monitor the counterparty credit risk associated with these transactions.

The paper reviews evidence from the economic literature on the nature of the relationship between excess capacity and inflation, better known as the Phillips curve. In particular, we examine the linearity of this relationship. This is an important issue in the current economic context in which advanced economies are approaching or exceed their potential output.

Canadian economic growth has slowed, reflecting the disruptive effects of US tariffs and a decline in population growth. Exports and business investment have slumped. After being close to 2% for several months, CPI inflation was 2.4% in September.

Governor Stephen S. Poloz discusses the need to integrate financial stability concerns with inflation control in conducting monetary policy after the financial crisis.

Canada’s financial system has continued to function well despite US tariffs and trade uncertainty. But a more turbulent global environment poses risks to financial stability, particularly if several vulnerabilities crystalize at the same time.

This analytical paper examines the organization of Government of Canada bond dealing. We focus on dealers’ hedging and funding practices, the market infrastructures that support those practices, and trading costs across the yield curve. This paper builds on earlier work discussing Canada’s fixed-income market: "Government of Canada Fixed-Income Market Ecology."

A retrospective of economic research at the Bank of Canada from 1935 to 1965.

This issue of the Financial System Review reflects the Bank’s judgment that the overall level of risk to Canada’s financial system remains largely unchanged from six months ago. The Bank continues to highlight two key vulnerabilities related to Canadian households: high levels of indebtedness and housing market imbalances. A third ongoing vulnerability is the potential for fragility in fixed-income market liquidity.

When it launched a new system for regularly announcing its decisions regarding the overnight rate of interest in December 2000, the Bank of Canada had a number of key objectives in mind. These included reduced uncertainty in financial markets, greater focus on the Canadian rather than the U.S. economic environment, more emphasis on the medium-term perspective of monetary policy, and increased transparency regarding the Bank's interest rate decisions. Evidence to date suggests that all four objectives have been met to a substantial degree. Fixed announcement dates have provided regular opportunities for the Bank to communicate its views on the state of the Canadian economy to the public. This has helped to improve understanding of the broad direction of monetary policy and of the rationale behind the Bank's policy decisions although the decisions themselves are not always fully anticipated.