no claim that these patterns are driven by trade. chart 6 : trend in income distribution across north american countries income share held by highest 10 % over income share held by lowest 10 %, annual, 1991 ( 1992 for mexico ), 2000, 2010 1991 ( for mexico 1992 ) canada united states mexico last observation : 2010 sources : world bank, haver analytics and bank of canada calculations shifts in income distribution could have implications for the standard open - economy models that policy - makers rely on. since they may have less access to credit, lowincome groups are more likely to be credit constrained and therefore less likely to be influenced by intertemporal substitution than high - income groups. meanwhile, highincome groups tend to make their spending plans independently of the level of interest rates. an increase in income dispersion, then, could increase the share of the population that is less influenced by interest rate fluctuations, perhaps pointing to a lower interest elasticity of consumption in aggregate. there is limited empirical evidence of this conjecture to date. however, it is important to acknowledge that the level of empirical confidence in estimates of the interest elasticity of aggregate demand is not high to start with. there is evidence that lowincome households have a higher marginal propensity to consume out of their disposable incomes than high - income households ( blundell, browning and meghir 1994 ; guvenen 2006 ; parker et al. 2013 ). while weakly supportive of the conjecture of a lower sensitivity to interest rate movements in partial equilibrium, this evidence also suggests that once the income effects from interest rate movements are factored in, low - income households won ’ t necessarily adjust their spending by less than their high - income counterparts. indeed, kaplan and violante ( 2014 ) offer a model in which increased income dispersion may actually increase interest sensitivity of consumption indirectly through a higher average income elasticity. in principle, the interest elasticity of aggregate demand represents an amalgam of a spectrum of actors, not a representative agent. the importance of this issue depends on how significant the underlying heterogeneity might be. a more promising line of inquiry might be to model income distribution explicitly, and to simulate the effects of an increase in income dispersion due to globalization in the model. a rough attempt to do so is explored in the next section. monetary policy implications of rising integration in this section we use the bank of canada ’ s macroeconomic policy model, totem (

stephen s poloz : opening statement before the standing senate committee on banking, trade and commerce opening statement by mr stephen s poloz, governor of the bank of canada, to the standing senate committee on banking, trade and commerce, ottawa, ontario, 25 april 2018. * * * good afternoon, mr. chairman and committee members. senior deputy governor wilkins and i are pleased to be back before you today to discuss the bank ’ s monetary policy report ( mpr ), which we published last week. when we were last here at the beginning of november, we saw signs that the canadian economy was moderating after an exceptionally strong first half of the year. that moderation turned out to be greater and to last a bit longer than we expected. still, it is important to recognize that inflation is on target and the economy is operating close to potential. that statement alone underscores the considerable progress seen in the economy over the past year. the slower - than - expected growth in the first quarter reflected two main issues. first, housing markets reacted to announcements of new mortgage guidelines and other policy measures by pulling forward some transactions into the fourth quarter of last year. that led to a slowdown in the first quarter that should naturally reverse. second, we saw weaker - than - expected exports during the quarter. this weakness was caused in large part by various transportation bottlenecks. some of this export weakness should also reverse as the year goes on. so, after a lacklustre start to 2018, we project a strong rebound in the second quarter. all told, we expect that the economy will grow by 2 per cent this year, and at a rate slightly above its potential over the next three years, supported by both monetary and fiscal policies. the composition of growth should shift over the period, with a decline in the contribution from household spending and a larger contribution from business investment and exports. inflation should remain somewhat above the 2 per cent target this year, boosted by temporary factors. these factors include higher gasoline prices and increases to the minimum wage in some provinces. their impact should naturally unwind over time, returning inflation to 2 per cent in 2019. of course, this outlook is subject to several important risks, and a number of key uncertainties continue to cloud the future, as was the case in november. in terms of risks to the outlook, the most important remains the prospect of a large shift toward protectionist trade polices around the globe. i should be clear that our forecast already includes