that the various stakeholders have not learnt the lessons yet. we have also come across instances of fraudulent messages confirming documentary credits being transmitted using swift infrastructure. although, the latter incidents were mainly a result of failure of internal controls and non - adherence to “ four eyes principles ”, it is also on account of reliance on disparate systems whereby swift transactions could be done without originating a corresponding transaction in the cbs. - in another incident involving shared mobile wallet of a bank, vulnerabilities were observed in the application itself which led to exploitation by the attackers. the originator of the transfer could get the amount reversed back to him without corresponding debit in the recipient ’ s account in a large number of transactions ( total amount involved was around rs. 12 crore ). bank was not performing any real time reconciliation and noticed it only when there was a spike in transactions which led to detection during reconciliation. the vulnerabilities exploited in the incident could have been averted, had the launch of the product not been rushed through. - in another incident, an e - payment validation website of a large bank was hacked. surprisingly, the bank was not aware of the incident till it was notified by a law enforcement agency. there was a facebook post by a person from a neighbouring country claiming responsibility for the operation. though the hacking incident did not result in any pecuniary loss as the site attacked was only performing validations of inputs entered by end users, nevertheless it demonstrates a serious security breach. 15. as may be seen from the examples quoted above, the cyber threat landscape is widening. this is natural, given that the money no longer moves only in physical form, but mostly through electronic means. it opens avenues for unscrupulous elements to devise ingenious methods for stealing it. one of the key targets by the attackers is the credential of the customers, as it provides the key to the “ khazana ( treasure ) ”. recent experience shows involvement of organised gangs and nation - state actors having huge financial backing. on the other hand, the cost of orchestrating such attacks is coming down. there are several reports indicating availability of credentials of customers for sale in dark web, which is really scary. improving cyber resilience 16. globally, the focus has now shifted to cyber security. cyber security is no longer an isolated incident affecting one industry / one country. several cyber - attacks in recent times have been designed to achieve political / religious objectives as also for

the higher costs of shopping abroad, creates limits to competitive pressures. in addition, paying attention and adjusting to fluctuations in the exchange rate requires time and energy. it is costly. when fluctuations in the exchange rate are relatively small, not all firms and consumers tend to pay close attention. it makes sense to focus attention where it matters most. that is one reason why prices are only adjusted over time and price gaps persist. however, when the movements in the exchange rate are particularly large, they attract more attention and the adjustments are much faster, which we saw in the fall of 2007. the most useful illustration of these phenomena is the behaviour of online book prices. these are often completely homogeneous goods on both side of the border. the cost of changing prices for an online retailer should be minimal. in addition, it is difficult to think of an easier case for consumers to take advantage of price differentials : comparing prices is just a matter of visiting different websites, there is no constraint or tariff involved when ordering from abroad, and transportation costs are known. despite all this, while online book prices do change frequently, they typically do not respond quickly to fluctuations in the exchange rate. however, in the fall of 2007, they did adjust to the strong canadian - dollar appreciation. typically, exchange rate movements tend to be reflected quickly in prices for only a narrow range of goods that are homogeneous in nature, e. g. fruits, vegetables, gasoline and meat prices. for other goods and services, there is no apparent short - run pass - through. the greater the value added in canada to a good or service, the smaller the role played by the exchange rate in its price. however, estimates of pass - through at a more aggregated level, such as core cpi or total cpi, are quite low. estimated pass - through is about 3 per cent for core inflation and 4 per cent for total inflation. to elaborate further, this means that a 10 per cent rise in the dollar would be expected to lower the level of total cpi by 0. 4 per cent. similar to the experience of many countries, exchange rate pass - through has declined in canada in the last 20 years. some possible explanations include : better - anchored inflation expectations associated with the conduct of monetary policy and increased credibility, and the changing composition of trade ( e. g. switching to different goods as relative prices change ). i trust these comments provide some insights to the underlying dynamics of canadian - u. s. price differentials. with that