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Since the May Report, the international economic environment has continued to improve. Economic activity abroad grew faster than expected, while inflation in the major economies remained subdued.

This is the second in a series of semi-annual reports designed to increase the transparency and understanding of Canadian monetary policy.

Over the past year, Canada’s economy has outperformed the economies of virtually all the other major industrial countries.

Over the last six months, most countries have continued to register strong economic growth.

Two major issues dominate the analysis and policy discussion in this Monetary Policy Report: the nature and extent of the global economic slowdown that began late last year and the consequences of the terrorist attacks in the United States.

We analyze 40 years’ worth of natural disasters using a local projection framework to assess their impact on provincial labour markets in Canada. We find that disasters decrease hours worked within a week and lower wage growth in the medium run. Our study highlights that disasters affect vulnerable workers through the income channel.

Our study aims to gain insight on financial stability and climate transition risk. We develop a methodological framework that captures the direct effects of a stressful climate transition shock as well as the indirect—or systemic—implications of these direct effects. We apply this framework using data from the Canadian financial system.