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How should central banks design monetary policy in stable times and during recessions? We run a horse race between five monetary policy frameworks in an experimental laboratory to assess how well the different approaches can manage the public’s expectations and stabilize the economy.

Many explanations for the decline in real interest rates over the last 30 years point to the role that population aging or rising income inequality plays in increasing the long-run aggregate demand for assets. Notwithstanding the importance of such factors, the starting point of this paper is to show that the major change driving household asset demand over this period is instead an increased desire—for a given age and income level—to hold assets.

The formulation of monetary policy at the Bank of Canada relies on the analysis of a broad set of economic information. Greater availability of immediate and detailed information would improve real-time economic decision making. Technological advances have provided an opportunity to exploit “big data” - the vast amount of digital data from business transactions, social media and networked computers. Big data can be a complement to traditional information sources, offering fresh insight for the monitoring of economic activity and inflation.

In theory, nominal exchange rate movements can lead to “expenditure switching” when they generate changes in the relative prices of goods across countries. This paper explores whether the expenditure-switching role of exchange rates has changed in the current episode of significant global imbalances.

This issue of the Financial System Review reflects the Bank’s judgment that the high level of household indebtedness and housing market imbalances remain the most important vulnerabilities. While these vulnerabilities are still elevated, improving economic conditions and recent changes to housing policy should support an easing of these vulnerabilities over time. A third vulnerability highlighted in the FSR concerns cyber threats and the interconnectedness of the financial system.

We study competition for consumer attention, in which platforms can sacrifice service quality for attention. A platform can choose the “addictiveness” of its service.

Cover page

Silver Presentation Salver

The salver, which was bequeathed to the Bank of Canada by Lady Macmillan in 1967, is part of the artifact collection of the Bank of Canada Archives.
Photography by Mone Cheng, Innovacom, Ottawa.

We construct and estimate a structural two-stage model of equilibrium in a market for payments in order to quantify the network externalities and identify the main determinants of consumer and merchant decisions.

This paper proposes a theoretical framework to analyze the relationship between credit shocks, firm defaults and volatility, and to study the impact of credit shocks on business cycle dynamics.

Studies such as Lemmon, Roberts and Zender (2008) demonstrate how stable firms’ capital structures are over time, and raise the question of whether new theories of capital structure are needed to explain these phenomena.