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The Bank of Canada, through its Standing Liquidity Facility (SLF), provides access to liquidity to those institutions that participate directly in the Large Value Transfer System (LVTS).

This paper explores the reliability of using prices of credit default swap contracts (CDS) as indicators of default probabilities during the 2007/2008 financial crisis.

While the service sector has been growing rapidly as a share of total output, aggregate productivity growth has generally lagged behind that of the goods sector. In this report, the author assesses a range of explanations for lagging service sector productivity growth.

Examining the incentives for banks to hold various assets on their balance sheets for use as collateral when the opportunity cost of doing so can be high; an outline of the complexity inherent in any modern risk-management system and review of possible strategies to improve the performance of risk management; causes and consequences of the changing pace of labour reallocation in Canada; description of the structure and functioning of BoC-GEM— an adaptation of the Global Economy Model— with examples of its recent application.

Should a CBDC be more like cash or bank deposits? An interest-bearing, cash-like CBDC not only makes payments more efficient but also increases total demand. This has positive effects on other transactions, inducing more deposit taking and lending and, thus, bank intermediation.

The Bank’s internal credit risk assessment abilities are regularly enhanced. In this note, we present a recent innovation that extends the set of market-based indicators used in the credit risk assessment of financial counterparties.

Can regulation solve problems arising from a natural monopoly? This paper analyzes whether “unbundling,” referring to regulations that enforce sharing of natural monopolistic infrastructure, prevents entrants from building new infrastructure.

Economists in the nineteenth century spent considerable time discussing the merits of a free-banking system, in which each commercial bank would be able to issue its own notes and deposits, subject to a convertibility requirement backed by its own gold reserves. Such a system, the proponents argued, would be able to deliver price-level stability yet be flexible enough to withstand the vicissitudes of the business cycle. Moreover, there would be no need for central banks. While this idea has received less attention in recent years, some economists still put it forward as a practical alternative to the current system. Laidler suggests that the centralizing tendencies in banking would inevitably undermine competition within a free-banking system, and lead to the natural emergence of one dominant bank. Other developments in the twentieth century, most notably the demise of the gold standard and widespread agreement that governments should play a determining role in setting monetary policy goals, have also limited the practicality of such a system. Laidler examines the Bank of Canada's history from the free-banking perspective and concludes that the current system of inflation targeting provides a much better anchor for orderly price-level behaviour than the free-banking system's convertibility could ever guarantee.

Bank of Canada Governor Tiff Macklem discusses how artificial intelligence could impact the economy, and outlines some of the implications for monetary policy.

Several studies have put forward the non-linear structure and option-like features of returns associated with hedge fund strategies.