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Information technology (IT) is an increasingly integral part of everyday business and personal life reflecting the ongoing and accelerating digital transformation of the economy. In this paper, we present information gathered from a survey with export-oriented firms in the Canadian IT service industry and consultations with industry associations aimed at shedding light on this small but highly dynamic sector.

This note investigates whether the recent weakness in inflation in Canada can be related to global factors not included in the current staff analytical framework (domestic slack, movements in commodity prices and in the exchange rate). A global common factor for inflation among selected advanced economies appears to contain marginal information for Canadian inflation beyond what is found in movements in commodity prices and the exchange rate.

Deputy Governor Timothy Lane talks about how the Bank of Canada is contributing to the modernization of our payments ecosystem, and how the COVID-19 pandemic has highlighted the need to make payments more convenient for all Canadians.

The Terms-of-Trade Economic Model, or ToTEM, replaced the Quarterly Projection Model (QPM) in December 2005 as the Bank's principal projection and policy-analysis model for the Canadian economy. Benefiting from advances in economic modelling and computer power, ToTEM builds on the strengths of QPM, allowing for optimizing behaviour on the part of firms and households, both in and out of steady state, in a multi-product environment. The authors explain the motivation behind the development of ToTEM, provide an overview of the model and its calibration, and present several simulations to illustrate its key properties, concluding with some indications of how the model is expected to evolve going forward.

We investigate competition between two intrinsically worthless currencies as a result of decentralized interactions between human subjects. We design a laboratory experiment based on a simple two-country, two-currency search model to study factors that affect circulation patterns and equilibrium selection.

Time-varying capital buffer requirements are a powerful tool that allow bank regulators to avoid severe financial stress without the cost of imposing very high levels of capital. However, this tool is only effective if banks understand how it is used. I present a model that banks and financial market participants can use to anticipate how time-varying capital buffer requirements change over time.

Governor Mark Carney discusses the factors driving global deleveraging and the implications for economic growth in Canada.

US trade protectionism is making the economic outlook increasingly uncertain. To assess how consumer prices may respond to tariffs, we examine a tariff episode from 2018 using detailed microdata and the synthetic control method.

Conditions in the international financial system have improved considerably since June in response to the forceful actions taken by policy-makers around the world.

FSR Highlights - December 2009

We propose a novel approach to estimating consumer demand for differentiated products. We eliminate the need for instrumental variables by assuming demand shocks are sparse. Our empirical applications reveal strong evidence of sparsity in real-world datasets.