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The Bank expects a sharp rebound in economic activity in the reopening phase of the recovery, followed by a more prolonged recuperation phase.

The formulation of monetary policy at the Bank of Canada relies on the analysis of a broad set of economic information. Greater availability of immediate and detailed information would improve real-time economic decision making. Technological advances have provided an opportunity to exploit “big data” - the vast amount of digital data from business transactions, social media and networked computers. Big data can be a complement to traditional information sources, offering fresh insight for the monitoring of economic activity and inflation.

The spread between long-term and short-term interest rates has proven to be an excellent predictor of changes of economic activity in Canada. As a general rule, when long-term interest rates have been much above short-term rates, strong increases in output have followed within about a year; however, whenever the yield curve has been inverted for any extended period of time, a recession has followed. Similar findings exist for other countries, including the United States. But although Canadian and U.S. interest rates generally move quite closely together, the Canadian yield curve has been distinctly better at predicting future Canadian output. The explanation given for this result is that the term spread has reflected both current monetary conditions, which affect short-term interest rates, and expected real returns on investment and expectations of inflation, which are the main determinants of long-term rates. This article is mainly a summary of econometric work done at the Bank. It also touches on some of the extensive recent literature in this area.

Last week, we released our eleventh Monetary Policy Report. Since our November Report, the Canadian economy has outperformed expectations. Bolstered by vigorous external and domestic demand, Canada's economic expansion strengthened in the second half of 1999 and into early 2000.

The Bank projects that the Canadian economy will continue to grow in line with its potential through 2020.

This past year, we have had to deal with the implications for our economy and our currency of increased global uncertainty and pressures arising from the problems that originated in Southeast Asia. I am sure that the effects of these developments, especially on primary commodities, such as oil and nickel, are already very familiar to Newfoundlanders.

As is the case for so many cities and regions in Canada, London's economy and that of southwestern Ontario are directly affected by changes in the global economy. And, as with so many things in life, the better we understand the forces of change, the better equipped we are to deal with them.

Growth has slowed in many emerging-market economies (EMEs) since the 2007–09 global financial crisis, reflecting both cyclical and structural factors. In this context, it will be in-creasingly important for EMEs to raise potential growth by maintaining steady progress on structural reforms. How do structural reforms generally support growth? What are the re-form priorities for EMEs over recent history and today? Finally, what will be the impact of planned structural reforms on potential output growth among the world’s larger EMEs? These are some of the questions considered by the authors.

This monthly newsletter features the latest research publications by Bank of Canada economists including external publications and working papers published on the Bank of Canada’s website.

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+.