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We demonstrate the usefulness of payment systems data and machine learning models for macroeconomic predictions and provide a set of econometric tools to overcome associated challenges.

This section of the Financial System Review examines the recent performance of the Canadian financial system and the factors, both domestic and international, that are influencing it.

In this paper, we assess several methods that have been used to measure the Canadian trend unemployment rate (TUR). We also consider improvements and extensions to some existing methods.

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.

We study the transmission and third-country effects of international sanctions. A sanctioned country’s losses are mitigated, and the sanctioning country’s losses amplified, if a third country does not join the sanctions, but the third country benefits from not joining.

We present a tool for creating density nowcasts for Canadian real GDP growth. We demonstrate that the combined densities are a reliable and accurate tool for assessing the state of the economy and risks to the outlook.

We use detailed consumer credit data to investigate the impact of the 2016 Fort McMurray wildfire, the costliest wildfire disaster in Canadian history, on consumers’ financial stress. We focus on the arrears of insured mortgages because of their important implications for financial institutions and insurers’ business risk and relevant management practices.

What is the role of central banks in financial stability? How has this role changed in recent years? Bank researchers share their insights on this matter and provide an overview of recent changes the Bank has made to its Emergency Lending Assistance Policy. Researchers also provide a history of four major commodity supercycles, dating back to the early 1900s. Finally, there is discussion about structural reforms in emerging-market economies, such as China, and how these reforms influence potential growth.

The uncertainty regarding inflation that is observed in density forecasts of households and professionals helps macroeconomists understand the formation mechanism of inflation expectations. Shocks to inflation take time to be perceived by all agents in the economy, and such rigidity is lower in a high-inflation environment.

The Bank of Canada’s 2013 Methods-of-Payment Survey indicates that the share of cash in the overall number of retail transactions has continued to decrease, mainly because of increased use of contactless credit cards. The share of cash in the total value of retail transactions was virtually unchanged from 2009 to 2013. In particular, the value share of cash transactions above $50 increased. Automated banking machines (ABMs), still the major source of cash for Canadians, were used less often in 2013 than in 2009. Cash use in Canada is broadly similar to that in Australia and the United States.