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As major producers of commodities, both Canada and Australia rely heavily on international trade for our economic expansion, and we each rely extensively on global capital markets. So, what I would like to talk about first is how we see the global and Canadian economies unfolding and what we might expect to see in the future. Following that, I'll also talk about some of the policies that can best help countries like ours to deal with the challenges of today's global economy, looking at this from both a domestic and an international perspective.

Commentary and technical data relating to the 2006 target renewal.

In a speech by video conference to the Ontario Economic Leadership Summit in Niagara-on-the-Lake, Governor Dodge reviewed the Bank's projections contained in the Monetary Policy Report, published last week.

Things have changed somewhat since then. While global economic growth is expected to be a little higher than anticipated last spring, a weaker near-term outlook for the U.S. economy has curbed the near-term prospects for Canadian exports and growth.

How can we develop human capital to its fullest potential, and retain that capital? How can we foster research, innovation, and commercialization in this province? How can we improve Ontario's competitiveness in the global marketplace?

The Terms-of-Trade Economic Model, or ToTEM, replaced the Quarterly Projection Model (QPM) in December 2005 as the Bank's principal projection and policy-analysis model for the Canadian economy. Benefiting from advances in economic modelling and computer power, ToTEM builds on the strengths of QPM, allowing for optimizing behaviour on the part of firms and households, both in and out of steady state, in a multi-product environment. The authors explain the motivation behind the development of ToTEM, provide an overview of the model and its calibration, and present several simulations to illustrate its key properties, concluding with some indications of how the model is expected to evolve going forward.

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The "pretended" Bank of Upper Canada — Kingston (1819-22)

The note is part of the National Currency Collection of the Bank of Canada.
Photography by Gord Carter

Staff projections provided for the Bank of Canada's monetary policy decision process take into account the integration of Canada's very open economy within the global economy, as well as its close real and financial linkages with the United States. To provide inputs for this projection, the Bank has developed several models, including MUSE, NEUQ (the New European Quarterly Model), and BoC-GEM (Bank of Canada Global Economy Model), to analyze and forecast economic developments in the rest of the world. The authors focus on MUSE, the model currently used to describe interaction among the principal U.S. economic variables, including gross domestic product, inflation, interest rates, and the exchange rate. Brief descriptions are also provided of NEUQ and BoC-GEM.

Conference held on 20 and 21 October 2006 (papers in unedited, electronic format only)

The Bank of Canada today released the October Monetary Policy Report, which discusses current economic and financial trends in the context of Canada's inflation-control strategy.