Search

To track how firms were affected by the appreciation of the Canadian dollar in 2003 and 2004 and the steps they took in response, the Bank included supplementary questions in the quarterly Business Outlook Survey conducted by its regional offices. About half of the firms surveyed reported being adversely affected, one-quarter experienced a favourable impact, and the remainder reported no effect. Jean Mair classifies and summarizes the firms' responses, identifying the sectors that were most and least affected. Causes of the impacts are identified, as well as the actions firms took as a result of the appreciation. The article looks at these actions over time to see what they tell us about firms' adjustment process.

In this paper, we empirically study how flagship entry in an online marketplace affects consumers, the platform, and various sellers on the platform. We find flagship entry may benefit consumers by expanding the choice set, by intensifying price competition within the entry brand, and by improving consumer perception for parts of the platform.

The Reports section of the Financial System Review examines selected issues of relevance to the Canadian and global financial systems. The December 2015 issue features two reports on significant developments in the financial system related to household finances: the importance of residential mortgage securitization for Canadian housing finance and the changing patterns of indebtedness of Canadian households.

This note analyzes different economic models of a central bank digital currency (CBDC) ecosystem where the central bank chooses different levels of market involvement and usage of policy levers. The analysis suggests that there are trade-offs between the costs to the central bank and its ability to achieve policy goals like universal access.

The consumer price index (CPI) is used to measure changes in the price level of consumer goods and services. As an indicator of changes in the cost of living, it is susceptible to various types of measurement biases. This article provides estimates of the size of these biases in the Canadian CPI. It concludes that the rate of increase in the CPI probably overstates the rate of increase in the cost of living by about 0.5 percentage points per year.

Should unemployment benefits be more generous during economic downturns? The optimal amount and duration of benefit payments ultimately depend on the demographic and wealth characteristics of benefit recipients.

When prices are sticky, movements in the nominal exchange rate have a direct impact on international relative prices. A relative price misalignment would trigger an adjustment in consumption and employment, and may help to predict future movements in the exchange rate.

This issue of the Financial System Review focuses on the impact of COVID 19. The pandemic presents an unprecedented shock to the Canadian economy. This report identifies the effects on the Canadian financial system and explains how recent actions by the Bank and other policy-makers are helping to manage them. It further describes how a resilient financial system can help households and businesses smooth the effects of the COVID-19 shock and prepare for a robust recovery.

We investigate the economic forces behind the secular decline in bond yields. Before the anchoring of inflation in the mid-1990s, nominal shocks drove inflation, output and bond yields. Afterward, the impacts of nominal shocks were much less significant.

Long-term Canada-U.S. interest spreads have changed remarkably during the 1990s. The unusually wide spreads of the first half of the decade have given way to an unprecedented run of negative yield differentials. In this article, the author examines the conceptual aspects of yields on international assets and their application to the Canada-U.S. situation. Prior to 1995, investors were unsure that, over the long run, inflation would meet the targets set by the government and the Bank. Policy credibility was undermined by large budget deficits and political uncertainty. In the second half of the decade, confidence was re-established as the fiscal positions of governments improved, long-run price stability became established, and political concerns about Quebec lessened. As long as these fundamentals hold, long-term rates should remain relatively low, even when short-term rates rise.