Alternative Scenario to the October 2017 MPR Base-Case Projection: Higher Potential Growth

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We construct an alternative scenario in which trend labour input and business investment are stronger than that expected in the Bank of Canada’s base-case projection in the October 2017 Monetary Policy Report. We find that while the size and timing of these effects are highly uncertain, the level of potential and real output could be almost 1 per cent higher than expected by the end of 2020. The resulting effect on the output gap and inflation is small and therefore does not affect the stance of monetary policy.