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Business cycles are substantially correlated across countries. Yet most existing models are not able to generate substantial transmission through international trade. We show that the nature of such transmission depends fundamentally on the features determining the responsiveness of labor supply and labor demand to international relative prices.

We analyze 40 years’ worth of natural disasters using a local projection framework to assess their impact on provincial labour markets in Canada. We find that disasters decrease hours worked within a week and lower wage growth in the medium run. Our study highlights that disasters affect vulnerable workers through the income channel.

Following an estimated 1.9 per cent in 2012, the Canadian economy is expected to grow by 2.0 per cent in 2013 and 2.7 per cent in 2014, and to reach full capacity in the second half of 2014, later than anticipated in the October Report.

This article summarizes the proceedings of a conference hosted by the Bank of Canada in May 1997. The first conference held by the Bank on this subject was in 1993, two years after the introduction of inflation targeting in Canada. The 1997 conference revisited many of the analytic issues related to price stability that had been examined at the first conference, while also considering several additional questions. This time, with the extension of inflation-control targets beyond 1998 under consideration, particular emphasis was placed on the role and design of those targets. The conference also featured a round-table discussion among practitioners of monetary policy in three inflation-targeting countries—New Zealand, Sweden, and the United Kingdom. Their remarks, which focussed on the experience with inflation targets, bring out very clearly the common challenges facing monetary policymakers in open economies.

Policy-makers around the world met the intensification of the global financial crisis at the end of 2008 with a forceful response aimed at restoring confidence in the global financial system, promoting the flow of credit, and supporting economic activity.

FSR Highlights - June 2009

Erratum: Legends for Chart 13 on page 15 of the June 2009 issue should read: Argentina (right scale), Mexico (left scale). See revised chart.

Many central banks are contemplating whether to issue central bank digital currency. This piece explores the implications as well as potential motivators of such a step.

The financial system makes an important contribution to the welfare of all Canadians. The ability of households and firms to confidently hold and transfer financial assets is one of the fundamental building blocks of the Canadian economy.

Average hourly real wage series from the Labor Productivity and Costs (LPC) program and the Current Employment Statistics (CES) program have evolved very differently over the past decades.

Deputy Governor Lawrence Schembri discusses the historical evolution and future prospects for Canadian exports.

This paper proposes a novel methodology for identifying episodes of strong capital flows based on a regime-switching model. In comparison with the existing literature, a key advantage of our methodology is to estimate capital flow regimes without the need for context- and sample-specific assumptions.