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Many emerging-market economies (EMEs) have significantly improved their macroeconomic fundamentals and undergone structural reforms since the Asian crisis. These developments have enhanced the composition of capital flows to EMEs through an improved debt structure, a larger share of capital flows as foreign direct investment, and greater access to international debt markets for corporations in EMEs. Structural changes in the global financial landscape have also increased capital flows, bringing economic and financial benefits to EMEs. During the recent financial crisis, however, the opening up of capital accounts and increased financial and trade linkages left many countries vulnerable to external disruptions. Countries with sound fundamentals have weathered the crisis relatively well. Policy-makers in EMEs need to implement policies that support capital flows and ensure that controls imposed to deal with detrimental outflows during periods of stress or rapid inflows are only temporary.

These forecasts are provided to Governing Council in preparation for monetary policy decisions. They are released once a year with a five-year lag.

In the past few years, many have postulated that the possible disinflationary effects of digitalization could explain the subdued inflation in advanced economies. In this note, we review the evidence found in the literature. We look at three main channels.

I provide evidence that portfolio equity inflows can have expansionary effects on GDP and inflation if not offset by monetary policy. I use a shift-share instrument to estimate equity inflows based on plausibly exogenous timing of inflows into mutual funds with heterogeneous country portfolios.

In a speech to the Vancouver Board of Trade, Governor Mark Carney discusses the fundamentals of the Canadian residential real estate market, the international context, and the implications for monetary policy.

COVID-19 affects technology adoption: online job postings for technology-related occupations fall less during pandemic lockdowns and pick up faster during reopenings than postings for more traditional occupations.

How can Surveys of Professional Forecasters (SPF) be used to improve inflation forecasts? By using US historical quarterly data on SPF forecasts, we provide better understanding of how we can use forecast disagreement to improve our own forecasts.

We identify the drivers of unsecured and collateralized loan volumes, rates and haircuts in Canada using the Bayesian model averaging approach to deal with model uncertainty. Our results suggest that the key friction driving behaviour in this market is the collateral reallocation cost faced by borrowers.

The three articles in this issue provide an overview of the monetary policy decision-making process at the Bank of Canada, a discussion of Bank research on the assessment of vulnerabilities in the financial system and a description of recent fragmentation in Canadian equity markets.