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Microfinance institutions now serve over 10 million poor households in the developing and developed world, and much of their success has been attributed to their innovative use of peer group lending. There is very little empirical evidence, however, to suggest that group lending schemes offer a superior institutional design over lending programs that serve individual borrowers.

We introduce a new class of time-varying parameter vector autoregressions (TVP-VARs) where the identified structural innovations are allowed to influence — contemporaneously and with a lag — the dynamics of the intercept and autoregressive coefficients in these models.

Existing literature documents that house prices respond to monetary policy surprises with a significant delay, taking years to reach their peak response. We present new evidence of a much faster response.

This note presents the updated estimates of potential output growth for the global economy through 2021. Global potential output is expected to grow by 3.3 per cent per year over the projection horizon.

This article examines the developments in the monetary aggregates over the course of 1997 and their implications for future economic activity. The narrow aggregate, M1, grew rapidly in the first half of 1997 but slowed somewhat during the second half of the year. Much of the strong growth in this aggregate over the last several years has been associated with a higher demand for transactions balances as interest rates declined and economic activity revived. There were some special factors at play, however, that are discussed in the article. The Bank expects some slowing in M1 growth through 1998 and into 1999. This would be consistent with a trend of inflation within the inflation-control target range of 1 to 3 per cent over the next couple of years. Growth in the broad aggregate, M2+, continued to be distorted by the shift of savings out of fixed-term deposits into mutual funds. A broader aggregate that includes M2+, CSBs, and all mutual funds and thus provides a better estimate of broad money growth, grew at a moderate pace during 1997. The recent behaviour of the broad monetary aggregates continues to suggest that inflation will remain low in coming years.

When players repeatedly face an identical or similar game (e.g., coordination game, technology adoption game, or product choice game), they may learn through experience to perform better in the future. This learning behaviour has important economic implications.

Senior Deputy Governor Carolyn A. Wilkins talks about the importance of business investment to the Canadian economy and reviews the latest interest rate decision.

The author proposes a new test for financial contagion based on a non-parametric measure of the cross-market correlation. The test does not depend on the assumption that the data are drawn from a given probability distribution; therefore, it allows for maximal flexibility in fitting into the data.

Estimating potential output and the output gap - the difference between actual output and its potential - is important for the proper conduct of monetary policy. However, the measurement and interpretation of potential output, and hence the output gap, is fraught with uncertainty, since it is unobservable.

This paper contributes to the literature by documenting labour income share fluctuations in emerging-market economies and proposing an explanation for them. Time-series data indicate that emerging markets differ from developed markets in terms of changes in the labour share over the business cycle.