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The first step in designing effective policies to stabilize an economy is to understand business cycles. No country is isolated from the world economy and external shocks are becoming increasingly important.

This paper outlines and assesses the various channels through which digitalization can affect prices of goods and services.

Using newly matched data on US defense contracts and restricted administrative employment data, we show that the employment effects of defense procurement are costly, concentrated and slow to diffuse.

Financial markets can experience sudden and extreme downward movements. Investors are highly concerned about the performance of their assets in such scenarios. Some assets perform badly in a downturn in the market; others have milder reactions.

Real rigidities are an important feature of modern sticky price models and are policy-relevant because of their welfare consequences, but cannot be structurally identified from time series. I evaluate the plausibility of capital specificity as a source of real rigidities using a two-dimensional generalized (s,S) model calibrated to micro evidence.

The primary focus of this paper is to study conflict of interest in the brokerage market. Brokers face a conflict of interest when the commissions they receive from investors differ from the costs imposed by different trading venues.

The Bank of Canada’s annual economic conference, held in October 2012, brought together experts from across Canada and around the world to discuss key issues concerning financial intermediation and vulnerabilities. The conference covered such topics as household finances and their relationship to financial stability, as well as bank regulation, securitization and shadow banking.

ToTEM – the Bank of Canada’s principal projection and policy-analysis model for the Canadian economy – is extended to include inventories. In the model, firms accumulate inventories of finished goods for their role in facilitating the demand for goods.

A series of major international financial crises in the 1990s, and the recent introduction of the euro, have renewed interest in alternative exchange rate systems. The choice of exchange rate regime is particularly relevant for emerging-market countries because other countries are perceived either as having no alternative to their current exchange rate arrangement or as highly unlikely to change. This article examines the evolution of exchange rate regimes in emerging markets over the past decade and compares the strengths and weaknesses of the various available systems. These include intermediate regimes, such as the adjustable pegged exchange rate popular throughout much of the post—war period, and the two extreme exchange rate regimes: permanently fixed or freely floating exchange rate regimes. Two recently proposed alternatives are also evaluated: the Managed Floating Plus and Baskets, Bands, and Crawling Pegs. Both try to combine the best elements of the flexible and fixed exchange rate systems, but the Managed Floating Plus is deemed to be the more promising alternative.

The authors construct three financial conditions indexes (FCIs) for Canada based on three approaches: an IS-curve-based model, generalized impulse-response functions, and factor analysis.