Why did traditional monetary frameworks fail?
They relied on unobservable variables and underestimated regime shifts.
What did recent inflation surges reveal?
Inflation expectations can de-anchor rapidly.
Why is financial stability now central to monetary policy?
Rate changes fail when markets malfunction.
What tools must future frameworks combine?
Monetary, fiscal, and macroprudential tools.
Why didn’t Canada reverse its price-level increase?
Inflation targeting focuses on future inflation, not past overshoots.
What mistake did the Bank of Canada acknowledge?
Falling behind the curve on inflation.
Why was inflation hard to assess during COVID?
Simultaneous inflationary and deflationary shocks.
What is a catastrophe bond?
A bond that pays out when a specified disaster occurs.
Who bears the risk?
Investors.
Key advantage?
Fast access to disaster funds.
Key limitation?
Does not cover total damage.
Why do bond yields turn negative?
High demand for safe assets pushes prices up.
Why do investors still buy them?
Expected capital gains.
Major benefit?
Financial inclusion.
Long-term risk of negative yields?
Lower pension returns and market distortions.
What is FinTech?
Digital technologies transforming financial services.
How does AI reduce costs?
Automating back-office and compliance tasks.
Major risk?
Cybersecurity and weak regulation.
How does AI increase revenue?
Personalized products and improved customer experience.
Biggest AI risks?
Bias, privacy, and explainability.
What is a blockchain?
A distributed, tamper-resistant ledger.
What is mining?
Solving puzzles to validate transactions and earn tokens.
Why is cheating difficult?
Requires control of most network computing power.
What is a CBDC?
Central-bank-issued digital cash.
