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The Canadian economy continues to adjust to major global developments.

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

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.

Growth in the global economy began to slow in the fourth quarter of 2007 and the first quarter of 2008. This reflected the effects of the slowdown in the U.S. economy and ongoing dislocations in global financial markets.

ToTEM III is the most recent generation of the Bank of Canada’s main dynamic stochastic general equilibrium model for projection and policy analysis. The model helps Bank staff tell clear and coherent stories about the Canadian economy’s current state and future evolution.

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

The authors examine how the use of extreme value theory yields collateral requirements that are robust to extreme fluctuations in the market price of the asset used as collateral.

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

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

During the past six months, global economic uncertainties have intensified, largely as a result of developments in emerging-market economies.