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This paper examines the implications of positive news about future asset values that turn out to be incorrect at a later date in an open economy model with banking. The model captures the patterns of bank credit and current account dynamics in Spain between 2000 and 2010. The model finds that the use of unconventional policies leads to a milder bust.

The global economy has been unfolding largely as expected, and prospects for continued robust growth are quite favourable, especially over the near term.

We model non-bank entry into fixed-income markets and state-dependent liquidity. Non-bank financial institutions improve liquidity more during normal times than in stress. Banks may become less reliable to marginal clients, exacerbating the difference in liquidity between normal and stressed times. Central bank lending during stress may limit this harmful division.

With inflation remaining low for the sixth consecutive year, the Canadian economy recorded a strong expansion of about 4 per cent through 1997.

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

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

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.

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

In the last half-year, the economic expansion in Canada has become well established, supported by low inflation, highly stimulative monetary conditions, and a strong U.S. economy.

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