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Deputy Governor Tim Lane discusses the global economic outlook and the integral – and historic – role of transport and logistics in building Canada’s prosperity.

Following growth of 1.8 per cent in 2012, the Canadian economy is expected to grow by 1.5 per cent in 2013, 2.8 percent in 2014 and 2.7 in 2015, and to reach full capacity in mid-2015, later than anticipated in the January Report.

A series of major international financial crises in the 1990s, and the recent introduction of the euro, have renewed interest in alternative exchange rate systems. The choice of exchange rate regime is particularly relevant for emerging-market countries because other countries are perceived either as having no alternative to their current exchange rate arrangement or as highly unlikely to change. This article examines the evolution of exchange rate regimes in emerging markets over the past decade and compares the strengths and weaknesses of the various available systems. These include intermediate regimes, such as the adjustable pegged exchange rate popular throughout much of the post—war period, and the two extreme exchange rate regimes: permanently fixed or freely floating exchange rate regimes. Two recently proposed alternatives are also evaluated: the Managed Floating Plus and Baskets, Bands, and Crawling Pegs. Both try to combine the best elements of the flexible and fixed exchange rate systems, but the Managed Floating Plus is deemed to be the more promising alternative.

In addition to its primary role as the country's central bank, the Bank of Canada also acts as the federal government's banker and financial adviser. One of the activities associated with this role as fiscal agent is managing the government's Canadian dollar balances. This function is examined in this article. The main priority is to ensure that the government has sufficient cash to meet its daily needs. This requires careful forecasting and monitoring of the government's daily receipt and expenditure flows, as well as an ongoing borrowing program to refinance maturing debt and to replenish the balances during periods when outflows, on average, exceed inflows. The cost of borrowing to raise cash balances for the government is considerably higher than the interest earned on any balances that are available "on demand." To reduce this net cost, balances in excess of those required for daily needs are invested in "term" deposits that earn a higher rate of interest than that earned on the demand balances. The net cost of holding government balances has also been reduced through the use of cash management bills, which are flexible, short-term borrowing instruments that complement the government's regular weekly issues of 3-, 6- and 12-month treasury bills.

The author traces developments in the Canadian covered bond market. Covered bonds could be a valuable way to provide a stable and diverse source of funding, particularly for smaller banks. However, higher issuance could increase banks’ vulnerability to liquidity stress, with implications for the broader financial system. The author argues that these benefits and challenges can be balanced in a well-designed policy framework.

Indeed, the global financial crisis of the past two years has presented unique, stressful challenges that have forced us all to assess what has worked well and what needs to change. Today, I would like to review some of the critical thinking around these issues, primarily from the perspective of our work at the Bank of Canada.

Deputy Governor Jean Boivin discusses aging in Canada and its impact on our economy.

The consumer price index (CPI) is the most commonly used measure of inflation in Canada.

Central banks face considerable uncertainty when conducting monetary policy. The COVID-19 pandemic brought this issue back to the forefront of policy discussions. We draw from academic literature to review key sources of uncertainty and how they affect the conduct of monetary policy.