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This Report presents the Bank of Canada’s assessment of the trend of inflation in Canada and explains the monetary policy actions deemed necessary to keep inflation within the Bank’s inflation-control target range.

This paper relaxes the Bayesian Nash equilibrium (BNE) assumption commonly imposed in empirical discrete choice games with incomplete information. Instead of assuming that players have unbiased/correct expectations, my model treats a player’s belief about the behavior of other players as an unrestricted unknown function. I study the joint identification of belief and payoff functions.

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 how the distribution of information supply by the news media affects the macroeconomy. We find that media coverage focuses particularly on the largest firms, and that firms’ equity financing and investment increase after media coverage. But these equity and investment responses are largest among small, rarely covered firms. Our quantitative studies highlight that the aggregate effects of media coverage depend crucially on how that coverage is allocated.

The five articles in this issue present research and analysis by Bank staff covering a variety of topics: the growth of Canadian-dollar-denominated assets in official foreign reserves; the emergence of platform-based digital currencies; methods of forecasting the real price of oil; measures of uncertainty in monetary policy; and the recent performance of the labour market in Canada and the United States.

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

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.

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

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

The Canadian economy regained strong momentum in 1999 as the U.S. economy remained vigorous, the global economy recovered, and commodity prices moved upwards.