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We expect potential output growth to be higher than in the October 2020 reassessment. By 2024, growth will be slightly above its average growth from 2010 to 2019. We assess that the Canadian nominal neutral rate continues to lie in the range of 1.75 to 2.75 percent.

This paper predicts phases of the financial cycle by using a continuous financial stress measure in a Markov switching framework. The debt service ratio and property market variables signal a transition to a high financial stress regime, while economic sentiment indicators provide signals for a transition to a tranquil state.

Advances in variance analysis permit the splitting of the total quadratic variation of a jump diffusion process into upside and downside components. Recent studies establish that this decomposition enhances volatility predictions, and highlight the upside/downside variance spread as a driver of the asymmetry in stock price distributions.

Senior Deputy Governor Carolyn A. Wilkins discusses developments in the Canadian labour market and factors that may help explain why wage growth is slower than expected.

Inflation rates in advanced economies experienced two consecutive puzzles during the period following the global financial crisis—unexpectedly high inflation from the end of 2009 to 2011 and unexpectedly low inflation from 2012 to the middle of 2014. We investigate these developments in two ways. First, we show that accounting for inflation expectations by households explains a significant share of the inflation puzzles at the international level. Second, we find that, for Canada, elevated competition in the retail sector is also important for understanding inflation dynamics in the post-crisis period.

At the onset of the pandemic, the Bank of Canada transitioned its framework for monetary policy implementation from a corridor system to a floor system, which it has since decided to maintain. We provide a comprehensive analysis of both frameworks and assess their relative merits based on five key criteria that define a sound framework.

This paper documents the properties of Government of Canada securities in cash, repo and securities lending transactions over their life cycle. By tracking every security from issuance to maturity, we are able to highlight inter-linkages between the markets for cash and for specific securities.

Monetary policy and financial stability are closely intertwined, and the resilience of the financial system carries weight in this relationship. This paper explores whether the financial system is more resilient as a result of the G20’s post-crisis agenda for financial regulatory reform.

How do households respond when they receive unanticipated income, such as an inheritance or government stimulus cheque? This paper studies these windfall income shocks through a model of household behaviour that generates a realistic consumption response for households along the entire distribution of wealth.