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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.

In its conduct of monetary policy, the Bank of Canada carefully monitors the pace of monetary expansion for indications about the outlook for inflation and economic activity. In recent years, a number of factors have distorted the growth of the traditional broad and narrow aggregates. In this article, the authors discuss the uncertainty surrounding the classification of deposit instruments that has resulted from the elimination of reserve requirements and from other financial innovations. They introduce two new measures of transactions balances, M1+ and M1++ (described more fully in a technical note in this issue of the Review), that internalize some of the substitutions that have occurred. They attribute the deceleration in M1 growth in 1998 partly to the declining influence of special factors, partly to a lagged response to interest rate increases in 1997 and early 1998, and partly to some temporary tightening in credit conditions in the autumn of 1998. The broad monetary aggregate M2++, which includes all personal savings deposits, life insurance annuities, and mutual funds, grew at a steady pace in 1998, presaging growth of about 4 to 5 per cent in total dollar spending and inflation inside the target range.

How do banks' interconnections in the euro area contribute to the vulnerability of the banking system? We study both the direct interconnections (banks lend to each other) and the indirect interconnections (banks are exposed to similar sectors of the economy). These complex linkages make the banking system more vulnerable to contagion risks.

What are the effects of financial market imperfections on unemployment and vacancies in Canada? The author estimates the model of Zhang (2011) – a standard monetary dynamic stochastic general-equilibrium model augmented with explicit financial and labour market frictions – with Canadian data for the period 1984Q2–2010Q4, and uses it to examine the importance of financial shocks on labour market fluctuations in Canada.

We study how input-output networks affect the speed of technology adoption. In particular, we model the decision to adopt the programming language Python 3 by software packages. Python 3 provides advanced features but is not backward compatible with Python 2, which implies it comes with adoption costs.

This paper explores the extent to which factors other than commodity and energy prices may have contributed to the Canadian dollar's depreciation since the early 1970s. The variables considered include among others budgetary conditions and productivity.

We introduce generalized autoregressive gamma (GARG) processes, a class of autoregressive and moving-average processes in which each conditional moment dynamic is driven by a different and identifiable moving average of the variable of interest. We show that using GARG processes reduces pricing errors by substantially more than using existing autoregressive gamma processes does.

Since the early 1980s, models based on economic fundamentals have been poor at explaining the movements in the exchange rate (Messe 1990). In response to this problem, Frankel and Froot (1988) developed a model that uses two approaches to forecast the exchange rate: the fundamentalist approach, which bases the forecast on economic fundamentals, and the chartist approach, which bases the forecast on the past behaviour of the exchange rate.

Stephen Murchison reviews the findings of recent Bank of Canada research on the relative merits of inflation targeting and price-level targeting (PLT) for a small open economy, such as Canada's, that is susceptible to large and persistent terms-of-trade shocks.

We document that, across households, the money consumption ratio increases with age and decreases with consumption, and that there has been a large increase in the money consumption ratio during the recent era of very low interest rates. We construct an overlapping generations (OLG) model of money holdings for transaction purposes subject to age (older households use more money), cohort (younger generations are exposed to better transaction technology), and time effects (nominal interest rates affect money holdings).