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The autumn Business Outlook Survey provides some signs of improving business prospects, as resource-related activity appears to be gradually bottoming out and foreign demand is providing steady support to firms’ sales expectations.

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Promissory Note, 1712

The note measures 28 cm x 16 cm and forms part of the National Currency Collection, Bank of Canada.

Photography by Gord Carter, Ottawa

Overall, businesses continue to be positive about the economic outlook, notwithstanding lower expectations for U.S. economic growth and recent financial market turbulence.

Using a novel data set for 17 countries dating from 1900 to 2013, we characterize business cycles in both small developed and developing countries in a model with financial frictions and a common shock structure. We estimate the model jointly for these 17 countries using Bayesian methods.

Canada’s economic growth is forecast to increase as interest rates gradually ease and both household and business confidence rise. Inflation is projected to return to the 2% target in 2025, though the trajectory may be bumpy.

Central banks face considerable uncertainty when conducting monetary policy. The COVID-19 pandemic brought this issue back to the forefront of policy discussions. We draw from academic literature to review key sources of uncertainty and how they affect the conduct of monetary policy.

To counter that uncertainty and bolster consumer and business confidence, the Bank of Canada moved aggressively to provide monetary stimulus. Between last September and January 2002, we lowered interest rates by 200 basis points, bringing the total reduction since January 2001 to 375 basis points.

Each year since 2004, the Bank of Canada has undertaken a questionnaire with banks that are active in the Canadian dollar foreign exchange market through offices in Toronto and/or Montréal.

Currency crises in the 1990s, especially those in emerging markets, have sharply disrupted economic activity, affecting not only the country experiencing the crisis, but also those with trade, investment, and geographic links. The authors review the theoretical literature and empirical evidence regarding these crises. They conclude that their primary cause is a fixed nominal exchange rate combined with macroeconomic imbalances, such as current account or fiscal deficits, that the market perceives as unsustainable at the prevailing real exchange rate. They also conclude that currency crises can be prevented through the adoption of sound monetary and fiscal policies, effective regulation and supervision of the financial sector, and a more flexible nominal exchange rate.

Harold Gallagher, Wade McMahon and Ron Morrow examine the various sources of cyber attacks and their potential for systemic risk. Against this background, the report highlights efforts being made to protect against cyber-security threats, including individual and collective actions by financial institutions and financial market infrastructures, as well as initiatives by international organizations, regulatory authorities and governments. The authors then describe the coordination, under the Joint Operational Resilience Management program, of private and public sector actions in Canada for managing and testing capabilities during severe operational events such as cyber attacks.