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The Canadian economy continues to operate just above its full production capacity, and the near-term outlook for core inflation has moved slightly higher.

We study the formation of price bubbles on experimental asset markets where cash earns interest. There are two main conclusions.

In this paper known results about the equivalence of state space and autoregressive moving-average models with exogenous inputs (ARMAX) (including vector auto-regressive or VAR models) are reviewed. While most of these results are not new, no single reference appears to bring together several important related points.

In the aftermath of the financial crisis, there is interest in reforming bank regulation such that capital requirements are more closely linked to a bank's contribution to the overall risk of the financial system. In our paper we compare alternative mechanisms for allocating the overall risk of a banking system to its member banks.

The Canadian economy continues to adjust to major global developments.

This Report outlines recent developments in the Canadian economy that affect the rate of inflation and provides an account of the measures taken by the Bank of Canada to control inflation.

At the time of last November’s Monetary Policy Report, two issues dominated the analysis: the global economic slowdown and the fallout from the September terrorist attacks.

The Canadian economy continues to grow at a solid pace, consistent with the Bank’s outlook in the January Monetary Policy Report Update.

There have been a number of significant economic and financial developments since the time of the July Monetary Policy Report Update.

Six months ago, at the time of the last Monetary Policy Report, the global economic and financial environment was volatile and highly uncertain because of the adverse situation in Asia and the fallout from the Russian debt moratorium.