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We model non-bank entry into fixed-income markets and state-dependent liquidity. Non-bank financial institutions improve liquidity more during normal times than in stress. Banks may become less reliable to marginal clients, exacerbating the difference in liquidity between normal and stressed times. Central bank lending during stress may limit this harmful division.

The Canadian economy continues to adjust to developments in the global economy.

How do banks' interconnections in the euro area contribute to the vulnerability of the banking system? We study both the direct interconnections (banks lend to each other) and the indirect interconnections (banks are exposed to similar sectors of the economy). These complex linkages make the banking system more vulnerable to contagion risks.

The global economy has been unfolding largely as expected, and prospects for continued robust growth are quite favourable, especially over the near term.

The authors examine how the use of extreme value theory yields collateral requirements that are robust to extreme fluctuations in the market price of the asset used as collateral.

There have been a number of significant economic and financial developments since the time of the July Monetary Policy Report Update.

Since the last Report, the Canadian economy has advanced broadly in line with expectations.

The global economy has continued to grow at a robust pace since the July Monetary Policy Report Update.

The Canadian economy continues to grow at a solid pace, consistent with the Bank’s outlook in the January Monetary Policy Report Update.

Growth in the Canadian economy has been essentially in line with the expectations set out in the Bank’s January Monetary Policy Report Update.