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In many countries, the cost of housing has greatly outpaced income growth, leading to a housing affordability crisis. Leveraging Canadian loan-level data and quasi-experimental variation in payment-to-income constraints, we document an increasing reliance of first-time homebuyers on financial help from their parents, through mortgage co-signing. We show that parental support can effectively relax borrowing constraints—potentially to riskier borrowers.

We examine the value of direct communication to households about inflation and the uncertainty around inflation statistics. All types of information about inflation are effective at immediately managing inflation expectations, with information about outlooks being more effective and relevant than that about recent inflation and Bank targets.

In 2024, the Canadian Overnight Repo Rate Average (CORRA) rose 7 basis points above the Bank of Canada’s target overnight rate as settlement balances declined and hedge fund borrowing increased by $30 billion, straining dealers’ balance sheets. Exercising market power, dealers raised rates, and as client activity grew, these higher rates increasingly influenced CORRAs deviation from target.

We build a network formation game of firms with trade flows to study the adoption and usage of a new digital currency as an alternative to correspondent banking.

In this article, the authors explain the methodology used to construct real exchange rate (RER) indexes. They also compare and assess various Canadian RER indexes from both an empirical and conceptual standpoint. The authors conclude that both theory and empirical evidence suggest that the best RER indexes are those based on unit labour costs. They note, however, that, for practical reasons, policy-makers should also consider RER indexes based on prices when formulating monetary policy.

The rise in digital payment innovations has spurred a discussion about the future of cash at the point of sale. The Bank conducted the 2021–22 Merchant Acceptance Survey Pilot Study to study trends in merchant cash acceptance and monitor conditions for the potential issuance of a central bank digital currency.

Information received since the last Monetary Policy Report, released on 17 November, points to a stronger pace of economic expansion in the United States and Europe than was expected at that time, and confirms the hesitant nature of the recovery in Japan.

Canada’s international competitiveness has received increasing attention in recent years as exports have fallen short of expectations and Canada has lost market share. This paper asks whether the Bank of Canada’s current effective exchange rate measure, the CERI, is still an accurate measure of Canada’s international competitiveness.

Constrained efficient allocation (CE) is characterized in a model of adverse selection and directed search (Guerrieri, Shimer, and Wright (2010)). CE is defined to be the allocation that maximizes welfare, the ex-ante utility of all agents, subject to the frictions of the environment.

The elimination of long-term contracts and early termination fees (ETFs) in the US wireless industry at the end of 2015 increased monthly service fees by 2 to 5 percent. Nevertheless, consumers are clearly better off without ETFs. While firms’ revenues from ETFs vanish, their profits from monthly fees increase. As a result, the overall effect on producer profits is less clear.