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One of the most important arguments in favour of price stability is that unexpected inflation generates changes in the distribution of income and wealth among different economic agents. These redistributions occur because many loans are specified in fixed dollar terms and unexpected inflation redistributes wealth from creditors to debtors by reducing the real value of nominal assets and liabilities.

In 1994, broad monetary aggregates such as M2+ grew at an unusually slow rate, indicating a continuation of low inflation. Narrow money, M1, ballooned early in the year, partly for technical reasons. However, its overall deceleration for the year as a whole would be consistent with lower output growth in the first half of 1995 than was seen the year before. During the first half of 1994, there was a continued shift by investors from deposits into equity, bond and mortgage mutual funds. In the second half of the year, following a rise in interest rates and a fall in the yields posted by mutual funds, there was a movement back into M2+. In this annual review of the monetary aggregates, the author discusses the reasons for these shifts and their implications for M2+.

We assess the health of the Canadian labour market. We find that it has seen gradual but material easing since 2023, amid some signs of structural changes.

In a simple two-sector New Keynesian model, sticky prices generate a counterfactual negative comovement between the output of durable and nondurable goods following a monetary policy shock. We show that heterogeneous factor markets allow any combination of strictly positive price stickiness to generate positive output comovement.

In this paper, we extend the state-space methodology proposed by Blagrave et al. (2015) and decompose Canadian potential output into trend labour productivity and trend labour input. As in Blagrave et al. (2015), we include output growth and inflation expectations from consensus forecasts to help refine our estimates.

This note summarizes the reassessment of potential output, conducted by the Bank of Canada for the April 2018 Monetary Policy Report. Overall, the profile for potential output growth is expected to remain flat at 1.8 per cent between 2018 and 2020 and 1.9 per cent in 2021.

This issue of the Financial System Review reflects the Bank’s judgment that high household indebtedness and housing market imbalances remain the most important vulnerabilities. While these vulnerabilities remain elevated, policy measures continue to improve the resilience of the financial system. A third vulnerability highlighted in the FSR concerns cyber threats to an interconnected financial system.

Using a structural model, we study the economic consequences of the COVID-19 shock. The uneven consequences, such as higher unemployment among young households, amplify the negative implications for the macroeconomy, household vulnerabilities and consumption inequality. Government support programs have stimulated the economy and lowered inequality and medium-term vulnerabilities.

We offer relevant authorities a three-step assessment framework they can use to understand, identify and quantify the risks associated with stablecoin and other cryptocurrency arrangements.

Canada's net external indebtedness increased from $110 billion in 1980 to $313 billion in 1993, reflecting the accumulation of current account deficits over many years.