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Dynamic general-equilibrium models (DGEMs) are being increasingly used in macroeconomic research. In this article, the author describes the main features of these models and outlines their contribution to economic research performed at the Bank of Canada. He notes that the basic principle of DGEMs is that the modelling of economic activity, even on a scale as large as the economy of a country, should start with a series of microeconomic problems (at the scale of individuals), which, once resolved, are aggregated to represent the macroeconomic reality described by the model.

Deposit insurance protects depositors from failing banks, thus making insured deposits risk-free. When a deposit insurance limit is increased, some deposits that previously were uninsured become insured, thereby increasing the share of risk-free assets in households’ portfolios. This increase cannot simply be undone by households, because to invest in uninsured deposits, a household must first invest in insured deposits up to the limit. This basic insight is the starting point of the analysis in this paper.

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.

When China joined the World Trade Organization in December 2001, it marked a watershed for the world economy. Ten years from now, the opening of China’s capital account and the financial integration that will unfold will be viewed as a milestone of similar importance.

We explore two scenarios for potential output growth to gain insights into the economic consequences associated with different possible trade policies. Scenario 1 includes limited US tariffs on Canadian exports. Scenario 2 adds a permanent, broad-based 25% increase in US tariffs on imports from all countries excluding Canada and Mexico.

This paper quantifies the impact of hurricanes on seaborne international trade to the United States. Matching the timing of hurricane–trade route intersections with monthly U.S. port-level trade data, we isolate the unanticipated effects of a hurricane hitting a trade route using two separate identification schemes: an event study and a local projection.

This note studies a form of a utility function of consumption with habit and leisure that (a) is compatible with long-run balanced growth, (b) hits a steady-state observed target for hours worked and (c) is consistent with micro-econometric evidence for the inter-temporal elasticity of substitution and the Frisch elasticity of labor supply.

The number of workers who hold more than one job (a.k.a. multiple jobholders) has increased recently in Canada. While this seems to echo the view that non-standard work arrangements are becoming pervasive, the increase has in fact been trivial compared with the long-run rise of multiple jobholding that has occurred since the mid-1970s.

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.