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Senior Deputy Governor Carolyn A. Wilkins discusses measures the Bank has taken to address the COVID-19 pandemic and set the stage for recovery.

To what extent does a central bank digital currency (CBDC) compete with bank deposits? To answer this question, we develop and estimate a structural model where each household chooses which financial institution to deposit their digital money with.

In the first, mostly theoretical, part of this article, the author analyses the factors that affect the pass-through of exchange rate movements to consumer prices. In the second part, she studies the recent Canadian experience in this area, starting from 1992. The analysis in the first part of the article is used to investigate why the depreciation of the Canadian dollar by almost 20 per cent between 1992 and 1994 did not produce as much of an increase in the inflation rate as predicted by conventional estimates of the exchange rate pass-through. The author first explains this phenomenon using the factors described in the theoretical part of the article: demand conditions, the costs of adjusting prices, and expectations about the depreciation's duration. She then examines the role of more specific factors, such as the abolition of customs duties on trade between Canada and the United States and the restructuring of the retail market. It is clear that the latter two factors helped neutralize the effect of the depreciation on prices.

Results of the spring Business Outlook Survey suggest that business sentiment continues to be positive, supported by healthy sales prospects. Due to recent strong demand, capacity and labour pressures are evident in most regions.

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.

Deputy Governor Agathe Côté discusses the inflation-targeting framework and issues the Bank is researching in the run-up to the renewal of the framework in 2016.

Bank of Canada Governor Stephen S. Poloz discusses the current economic context and how that is influencing the Bank’s work of delivering confidence.

Given the extent of uncertainty in the world today, we are all naturally preoccupied with near-term issues and prospects. That's understandable. But, at the same time, it's critical that we look past the short-term to the longer-term trends and potential of our economy.

We use models to better understand and assess how risks could affect the financial system. In our hypothetical scenario, a house price correction and elevated financial stress weigh on the economy. An increased number of households and businesses have difficulty repaying loans. Nonetheless, the large banks remain resilient.

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.