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The Canadian economy continues to adjust to developments in the global economy.

In our analysis of the US productivity slowdown in the 1970s and 2000s, we find that a significant portion of this deceleration can be attributed to a lack of improvement in allocative efficiency across sectors. Our analysis further identifies increased sector-level volatility as a major contributor to this lack of improvement in allocative efficiency.

Household debt can be an important source of vulnerability to the financial system. This technical report describes the Household Risk Assessment Model (HRAM) that has been developed at the Bank of Canada to stress test household balance sheets at the individual level.

We develop a model with firm heterogeneity in importing and cross-border shopping among consumers. Exchange-rate appreciations lower the cost of imported goods, but also lead to more cross-border shopping; hence, the net impact on aggregate retail prices and sales is ambiguous.

This equilibrium model explains the trend in long-term yields and business-cycle movements in short-term yields and yield spreads. The less-frequent inverted yield curves (and less-frequent recessions) after the 1990s are due to recent secular stagnation and procyclical inflation expectations.

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.

In the April Monetary Policy Report, the Bank noted that inflation was well above its 2 per cent target and that short-term inflation expectations had edged up.

Growth in the Canadian economy has been essentially in line with the expectations set out in the Bank’s January Monetary Policy Report Update.

We study competition for consumer attention, in which platforms can sacrifice service quality for attention. A platform can choose the “addictiveness” of its service.

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.