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An important channel in the transmission of monetary policy is the relationship between the short-term policy rate and long-term interest rates. Using a new term-structure model, the authors show that the variation in long-term interest rates over time consists of two components: one representing investor expectations of future policy rates, and another reflecting a term-structure risk premium that compensates investors for holding a risky asset. The time variation in the term-structure risk premium is countercyclical and largely determined by global macroeconomic conditions. As a result, long-term rates are pushed up during recessions and down during times of expansion. This is an important phenomenon that central banks need to take into account when using short-term rates as a policy tool.

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.

The Annual Report outlines the Bank’s activities and achievements in 2017. It includes the financial statements and a message from Governor Stephen S. Poloz.

Get quarterly data for the indicators we use to track the evolution of the financial stability of the Canadian economy.

The Bank’s new forecast calls for real economic growth of 1.2 per cent this year, 2.1 per cent next year and 2.0 per cent in 2021.

The effects of fiscal policy shocks on labour market outcomes across gender depend on the type of public expenditure. Women benefit most from increases in the government wage bill, while men are the main beneficiaries of higher investment spending.

The Bank projects the Canadian economy will grow by 2.4 per cent in 2012 and 2013 before moderating to 2.2 per cent in 2014. The economy is now expected to return to full capacity in the first half of 2013.

Senior Deputy Governor Carolyn Wilkins discusses the financial stability risks associated with slow growth and low interest rates, and explores strategies to mitigate them.

In this paper, we empirically study how flagship entry in an online marketplace affects consumers, the platform, and various sellers on the platform. We find flagship entry may benefit consumers by expanding the choice set, by intensifying price competition within the entry brand, and by improving consumer perception for parts of the platform.

We use detailed consumer credit data to investigate the impact of the 2016 Fort McMurray wildfire, the costliest wildfire disaster in Canadian history, on consumers’ financial stress. We focus on the arrears of insured mortgages because of their important implications for financial institutions and insurers’ business risk and relevant management practices.