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Since the last Report, the Canadian economy has advanced broadly in line with expectations.

The global economy has continued to grow at a robust pace since the July Monetary Policy Report Update.

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

We introduce behavioral learning equilibria (BLE) into DSGE models with boundedly rational agents using simple but optimal first order autoregressive forecasting rules. The Smets-Wouters DSGE model with BLE is estimated and fits well with inflation survey expectations. As a policy application, we show that learning requires a lower degree of interest rate smoothing.

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.

The Canadian economy continued to expand robustly in 2000 while inflation remained low.

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

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.

How do banks' interconnections in the euro area contribute to the vulnerability of the banking system? We study both the direct interconnections (banks lend to each other) and the indirect interconnections (banks are exposed to similar sectors of the economy). These complex linkages make the banking system more vulnerable to contagion risks.

Canada’s inflation-control targets establish a specific medium-term objective for monetary policy.