Canada’s recent economic performance has been stronger than in most other OECD countries. In particular, and despite close trade integration, the 2001 slowdown was shorter and the subsequent recovery stronger than in the United States. Canada’s job creation performance, exceptionally robust in 2002 after only a pause the previous year, was also significantly more favourable. It has benefited from a less pronounced ICT investment cycle and a smaller impact of stock price declines, as well as from having a proportionately larger automotive sector, which enjoyed booming demand in 2002 thanks to the earlier monetary policy easings in both countries. But recent performance also indicates an increased resilience to external shocks. This is partly the result of past structural reforms that increased flexibility, but it is also due to fiscal consolidation and the establishment of a credible monetary framework in the 1990s, which together lowered sustainable real interest rates and increased the scope for, and the effectiveness of, counter-cyclical monetary policy...