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We analyze the value proposition and limitations of decentralized finance (DeFi). Based on a distributed ledger and smart contracts, DeFi can guarantee the execution of financial contracts, potentially lowering the costs of intermediation and improving financial inclusion.

In an economy where production takes place in multiple stages and is subject to financial frictions, how firms finance intermediate inputs matters for aggregate outcomes. This paper focuses on trade credit—the lending and borrowing of input goods between firms—and quantifies its aggregate impacts during the Great Recession.

We analyze Canadian data from the Bank of Canada’s Business Leaders’ Pulse, examining firms’ sales growth expectations. We find that expected growth predicts outcomes, uncertainty influences forecast errors and revisions, and firms with weak past performance anticipate and experience weaker future growth. These results highlight the survey’s value for understanding business expectations.

I provide evidence that portfolio equity inflows can have expansionary effects on GDP and inflation if not offset by monetary policy. I use a shift-share instrument to estimate equity inflows based on plausibly exogenous timing of inflows into mutual funds with heterogeneous country portfolios.

The financial system makes an important contribution to the welfare of all Canadians. The ability of households and firms to confidently hold and transfer financial assets is one of the fundamental building blocks of the Canadian economy.

From 2011 to 2019, inflation in Canada and advanced economies usually registered below inflation targets, spurring the debate on whether the inflation process has changed. This paper highlights emerging questions that will influence the conduct of monetary policy in Canada in the near term.

We develop a heterogeneous-agent New Keynesian model featuring a frictional labor market with on-the-job search to quantitatively study the positive and normative implications of employer-to-employer transitions for inflation.

A large-scale reduction in mortgage principal can strengthen a recovery, support house prices and lower foreclosures. The nature of the intervention shapes its impact, which rests on how resources are redistributed across households. The availability of bankruptcy on unsecured debt changes the response to large-scale mortgage relief by reducing precautionary savings.

Severe disruptions in the financial markets, as observed during the 2008 global financial crisis or the COVID-19 pandemic, can impair the stability of the entire financial system and worsen macroeconomic downturns.

Given the rapid and ongoing integration of the global economy, the International Monetary Fund needs to renew its role, governance structure, and functions if it is to maintain its relevance as the institution charged with promoting global financial stability. Lecavalier and Santor examine the areas of possible reform, including quota, voice, and representation; internal governance; surveillance; lending instruments; finances; and the Fund's role in low-income countries. They also review current Bank of Canada research that supports these reform efforts, including an integrated framework for IMF surveillance recently developed at the Bank.