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This issue features four articles that present research and analysis by Bank staff. The first focuses on reforming the international monetary system; the second on the role of collateral and haircut policy in central bank lending; and the third on the extraction of information from the Business Outlook Survey using principal-component analysis. The fourth reviews studies that model the counterfeiting of bank notes.

The Bank projects that the economy will expand by 2.1 per cent in 2011, 1.9 per cent in 2012 and 2.9 per cent in 2013. Total CPI inflation is expected to trough around 1 per cent by the middle of 2012.

The survey results point to an overall easing in business-lending conditions during the third quarter of 2011. The balance of opinion of both the price and non-price aspects of business lending eased during the quarter.

Responses to the autumn survey point to less optimism among firms than in the summer survey. Indicators of future business activity, capacity constraints and price pressures have all moved down from the levels recorded in the previous survey.

Quarterly Financial Report - Second Quarter, 2011 - For the period ended 30 June 2011

This special issue, “Real-Financial Linkages,” examines the Bank’s research using theoretical and empirical models to improve its understanding of the linkages between financial and macroeconomic developments in the wake of the recent global financial crisis.

The Canadian economy is projected to expand by 2.8 per cent in 2011, 2.6 per cent in 2012, and 2.1 per cent in 2013, returning to capacity in the middle of 2012. Total CPI inflation is expected to return to the 2 per cent target by the middle of 2012.

The survey results point to an overall net easing in business-lending conditions. The balance of opinion regarding both price and non-price lending conditions showed the greatest degree of consensus on easing since the survey began in 1999.

Businesses remain positive about the outlook for the next 12 months, despite more modest expectations for U.S. economic growth. Indicators of future sales and investment are moderately higher, and intentions to hire have become more widespread.