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This issue of the Financial System Review reflects the Bank’s judgment that high household indebtedness and housing market imbalances remain the most important vulnerabilities. While these vulnerabilities remain elevated, policy measures continue to improve the resilience of the financial system. A third vulnerability highlighted in the FSR concerns cyber threats to an interconnected financial system.

The monthly data for real gross domestic product (GDP) by industry are used extensively in real time both to ground the Bank of Canada’s monitoring of economic activity and in the Bank’s nowcasting tools, making these data one of the most important high-frequency time series for Canadian nowcasting.

This section of the Financial System Review examines the recent performance of the Canadian financial system and the factors, both domestic and international, that are influencing it. In each issue, one or more subjects of particular interest are discussed as highlighted topics.

This paper examines the experience of Sweden with government notes and private bank notes to determine how well the Swedish experience corresponds to that of Canada and the United States. Sweden is important to study because it has had government notes in circulation for more than 350 years, and it had government notes before private bank notes.

The short-run Phillips curve describes a positive short-run relationship between the level of economic activity and inflation. When the level of demand in the economy as a whole runs ahead of the level of output that the economy can supply in the short run, price pressures increase and inflation rises. This article reviews the origins of the short-run Phillips curve with particular emphasis on the long-standing idea that the shape of this curve may be non-linear, with inflation becoming more sensitive to changes in output when the cycle of economic activity is high than when it is low. This type of non-linearity in the short-run Phillips curve, which is typically motivated by the effects of capacity constraints that limit the ability of the economy to expand in the short run, has recently attracted renewed attention. The article surveys recent research that finds some evidence of this type of non-linearity in the Phillips curve in Canada and considers the potential implications for monetary policy.

Immigrants can increase international trade by shifting preferences towards the goods of their country of origin and by reducing bilateral transaction costs. Using geographical variation across U.S. states for the period 2008 to 2013, I estimate the respective causal impact of immigrants on U.S. exports and imports.

Get quarterly data for the indicators we use to track the evolution of the financial stability of the Canadian economy.

Quarterly Financial Report - Second Quarter, 2011 - For the period ended 30 June 2011

Cover page

Promissory Note, 1712

The note measures 28 cm x 16 cm and forms part of the National Currency Collection, Bank of Canada.

Photography by Gord Carter, Ottawa

While inflation has come off its peak, it remains too high. As the economy responds to higher interest rates and as the effects of elevated commodity prices and supply disruptions fade, the Bank expects inflation to fall to about 3% in late 2023, then return to 2% in 2024.