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Since the May Report, the international economic environment has continued to improve. Economic activity abroad grew faster than expected, while inflation in the major economies remained subdued.

Since the last Report, the Canadian economy has advanced broadly in line with expectations.

The COVID-19 pandemic has caused an atypical recession in which some sectors of the economy boomed and others collapsed. This required a unique fiscal policy reaction to both support firms and stimulate activity in sectors with slack. Was fiscal policy able to get where it was needed? Mostly, yes.

Modeling and estimating persistent discrete data can be challenging. In this paper, we use an autoregressive panel probit model where the autocorrelation in the discrete variable is driven by the autocorrelation in the latent variable. In such a non-linear model, the autocorrelation in an unobserved variable results in an intractable likelihood containing high-dimensional integrals.

In the April Monetary Policy Report, the Bank noted that inflation was well above its 2 per cent target and that short-term inflation expectations had edged up.

This Report outlines recent developments in the Canadian economy that affect the rate of inflation and provides an account of the measures taken by the Bank of Canada to control inflation.

Using the quantum Monte Carlo algorithm, we study whether quantum computing can improve the run time of economic applications and challenges in doing so. We apply the algorithm to two models: a stress testing bank model and a DSGE model solved with deep learning. We also present innovations in the algorithm and benchmark it to classical Monte Carlo.

In the last half-year, the economic expansion in Canada has become well established, supported by low inflation, highly stimulative monetary conditions, and a strong U.S. economy.

We analyze 40 years’ worth of natural disasters using a local projection framework to assess their impact on provincial labour markets in Canada. We find that disasters decrease hours worked within a week and lower wage growth in the medium run. Our study highlights that disasters affect vulnerable workers through the income channel.

This Report presents the Bank of Canada’s assessment of the trend of inflation in Canada and explains the monetary policy actions deemed necessary to keep inflation within the Bank’s inflation-control target range.