Central counterparties (CCPs) have increasingly become a cornerstone of financial markets infrastructure. We present a model where trades are time-critical, liquidity is limited and there is limited enforcement of trades. We show a CCP novating trades implements efficient trading behaviour. It...

We develop a new series of Canadian monetary policy shocks and analyze their impact on inflation and real GDP from 1996-2020. Our shocks are constructed as the daily change in the Nelson-Siegel yield curve factors after a monetary policy announcement. Because these shocks include information...

The federal government will be increasingly constrained in its ability to provide effective stimulus in response to future severe cyclical economic downturns. Low interest rates restrict the Bank of Canada’s ability to stimulate private demand through interest-rate cuts. Similarly, high public...

For much of the past two decades, interest rates have fallen in Canada (and elsewhere). At the time of writing, however, with inflation well above the Bank of Canada’s 2 percent target, we are headed in the opposite direction. Where we will land over the long haul is unclear. However, it is...