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The fourth generation of Bank of Canada projection and policy analysis models seeks to improve our understanding of inflation dynamics, the supply side of the economy and the underlying risks faced by policy-makers coming from uncertainty about how the economy functions.

We look at the informational content of consensus pricing in opaque over-the-counter markets. We show that the availability of price data informs participants mainly about other participants’ valuations, rather than about the value of a financial security.

Average hourly real wage series from the Labor Productivity and Costs (LPC) program and the Current Employment Statistics (CES) program have evolved very differently over the past decades.

Since 1997 when the Bank of Canada last published a review of the Canadian overnight market, several important changes have affected the market's structure and dynamics. Reid provides a current overview of the market, examining the financial instruments, market transparency and flows, and the collateralized overnight rate as it has evolved since the introduction of the Large Value Transfer System and the fixed announcement dates. Other significant influences include changes in market practices regarding risk management, the rise of securities lending, the increased demand for collateral, and the Bank of Canada's measures to reinforce the target for the overnight rate.

Central banks are still defining their approach to financial stability and are at an early stage in the development of useful models. The Bank of Canada's 2007 economic conference was organized to stimulate progress in the development of financial-stability frameworks. Among the highlights reported here are the discussions centred around three proposed frameworks: a contingent-claims-analysis framework, a semi-structural framework, and structural financial-stability models. Participants also reported on their experiences with stress-testing under the International Monetary Fund's Financial Sector Assessment Program and discussed the implications for financial stability of linkages among payment, clearing, and settlement systems.

We identify the drivers of unsecured and collateralized loan volumes, rates and haircuts in Canada using the Bayesian model averaging approach to deal with model uncertainty. Our results suggest that the key friction driving behaviour in this market is the collateral reallocation cost faced by borrowers.

Text of major 1995 lecture by Bank Governor Gordon Thiessen, plus articles from Bank of Canada Review and other sources

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.

In a virtual address to the Canadian Association for Business Economics, Deputy Governor Lawrence Schembri discusses the difference between how Canadians perceive inflation and the actual measured rate. He explains why that gap may exist and what it could mean for monetary policy and the economy.

This issue of the Financial System Review reflects the Bank’s judgment that high household indebtedness and housing market imbalances remain the most important vulnerabilities. While these vulnerabilities remain elevated, policy measures continue to improve the resilience of the financial system. A third vulnerability highlighted in the FSR concerns cyber threats to an interconnected financial system.