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

Most models in finance assume that agents make trading plans over the infinite future. We consider instead that they are boundedly rational and may only form forecasts over a limited horizon.

Household debt can be an important source of vulnerability to the financial system. This technical report describes the Household Risk Assessment Model (HRAM) that has been developed at the Bank of Canada to stress test household balance sheets at the individual level.

The global economy has shown greater strength than was anticipated at the time of the November Report.

We develop a principal-agent model of cyber-attacking with fee-paying clients who delegate security decisions to financial platforms. We derive testable implications about clients’ vulnerability to cyber attacks and about the fees charged.

Emerging-market economies have become increasingly important in driving global GDP growth over the past 10 to 15 years. This has made timely and accurate assessment of current and future economic activity in emerging markets important for policy-makers not only in these countries but also in advanced economies.

Monte Carlo evidence has made it clear that asymptotic tests based on generalized method of moments (GMM) estimation have disappointing size. The problem is exacerbated when the moment conditions are serially correlated.

The authors estimate a small monthly macroeconometric model (BEAM, for bonds, equity, and money) of the Canadian economy built around three cointegrating relationships linking financial and real variables over the 1975–2002 period.

I show how to combine large numbers of forecasts using several approaches within the framework of a Bayesian predictive synthesis. I find techniques that choose and combine a handful of forecasts, known as global-local shrinkage priors, perform best.

At the time of the November 2000 Monetary Policy Report, although signs of the anticipated slowing of the U.S. economy were becoming apparent, the momentum of the global economy was considered strong.