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  • November 22, 2003

    Recent Labour Market Developments in Canada

    Bank of Canada Review - Autumn 2003 Richard Dion, Bill Laur
    In the year and a half leading up to mid-2003, both employment and labour force participation increased at an unusually rapid pace compared to domestic economic activity. Gains in employment were unusually large, relative to output growth, compared to gains in total hours worked. This is explained by a faster rate of increase in the participation rate of the 55 and older age group, many of whom opted for part-time employment. This shift in the composition of employment contributed to a reduction in the length of the average workweek in 2002. As a result, labour input progressed at a rate that was markedly slower than for employment and more in line with its historical relationship to output growth. The authors anticipate that the 55 and older age group will continue to participate strongly in the labour force, but that as the economy rebounds and uncertainty diminishes, the cyclical component in the growth of part-time work should diminish and that of full-time employment increase. Employment growth should moderate in relation to output growth and there may be a cyclical rebound in labour productivity as total hours worked increases during the initial recovery in output growth.
    Content Type(s): Publications, Bank of Canada Review articles Topic(s): Labour markets
  • November 21, 2003

    Developments, Issues, and Initiatives in Retail Payments

    Bank of Canada Review - Autumn 2003 Sean O'Connor
    Innovations in basic information technologies, in payment applications, and in the availability of global markets, as well as substantial changes in financial sector policy, have fundamentally changed how the retail payments system in Canada operates. Principally, the volume and types of electronic payments have grown, and there is increased participation by diverse groups of financial and non-financial institutions as providers of retail payment services. The resulting policy problem for payment systems is how best to benefit from efficiency gains while managing payment risks. O'Connor examines the effect of the technological and legislative changes and the initiatives developed by the public and private sectors in such areas as the market arrangements for services; customer risks and costs for settling large-value retail payments; the security of payment information and the efficiency with which it is transmitted; and the effects of differing regulatory regimes on competition among providers of retail payment services.
    Content Type(s): Publications, Bank of Canada Review articles Topic(s): Financial services, Payment clearing and settlement systems
  • November 20, 2003

    Technical Note: Elimination of Retroactive Settlement in the ACSS

    Bank of Canada Review - Autumn 2003 Eric Tuer
    Effective 1 November 2003, the Bank of Canada abandoned its practice of backdating the results of settlement of payments through the Automated Clearing Settlement System (ACSS). It has adopted instead a system of "next-day" settlement under which the results of the settlement process will appear on the central bank's books on the day the items actually settle in the ACSS. Since July 1986, settlement of these items had occurred at noon the day after items were presented for clearing, but the results were recognized on the Bank's books the previous day, through backdating, or "retroactive" settlement. The new system should simplify the payments process and improve the reporting of settlement risk, as well as promote cost-effectiveness within the payments systems. ACSS participants have agreed among themselves to implement an interest-compensation mechanism in order to avoid imposing a float charge on their customer base.
    Content Type(s): Publications, Bank of Canada Review articles Topic(s): Payment clearing and settlement systems
  • August 23, 2003

    Financial Developments in Canada: Past Trends and Future Challenges

    Bank of Canada Review - Summer 2003 Charles Freedman, Walter Engert
    Freedman and Engert focus on the changing pattern of lending and borrowing in Canada in the past thirty to forty years, including the types of financial instruments used and the relative roles of financial institutions and financial markets. They examine how borrowing mechanisms have changed over time and consider the challenges facing the Canadian financial sector, including whether our financial markets are in danger of disappearing because of the size and pre-eminence of U.S. financial markets. Some of the trends examined here include syndicated lending, securitization, and credit derivatives, a form of financial engineering that has become increasingly important in the last few years. They also study bond and equity markets to determine whether Canadian capital markets have been hollowed out or abandoned by Canadian firms and conclude that the data do not provide much support for that view.
    Content Type(s): Publications, Bank of Canada Review articles Topic(s): Financial institutions, Financial markets, Financial services, Recent economic and financial developments
  • August 23, 2003

    Bank of Canada Review - Summer 2003

    BoC Review - Summer 2003

    Cover page

    Canadian World War I War Bond

    The $100 10-year bond of the FirstWar Loan is slightly larger than a sheet of legal-sized paper. It forms part of the National Currency Collection, Bank of Canada.

    Photographed by Gord Carter, Ottawa.
    Content Type(s): Publications, Bank of Canada Review
  • August 22, 2003

    Measuring Interest Rate Expectations in Canada

    Bank of Canada Review - Summer 2003 Grahame Johnson
    Financial market expectations regarding future changes in the target for the overnight rate of interest are an important source of information for the Bank of Canada. Financial markets are the mechanism through which the policy rate affects other financial variables, such as longer-term interest rates, the exchange rate, and other asset prices. An accurate measure of their expectations can therefore help policy-makers assess the potential impact of contemplated changes. Johnson focuses on the expectations hypothesis, which measures expectations of future levels of the target overnight rate as implied by current money market yields. Although expectations can be derived from the current yield on any short-term fixed-income asset, some assets have proven to be more accurate predictors than others. The implementation of a policy of fixed-announcements dates has coincided with the increased predictive power of these short-term assets. As a result of this improvement, a relatively simple model of the yield curve can now provide an accurate measure of financial market expectations.
    Content Type(s): Publications, Bank of Canada Review articles Topic(s): Exchange rates, Financial markets, Interest rates
  • August 21, 2003

    Dollarization in Canada: An Update

    Bank of Canada Review - Summer 2003 John Murray, James Powell, Louis-Robert Lafleur
    The authors describe a special survey of the payment and financial-reporting practices of Canadian firms conducted by the Bank of Canada's regional offices to determine if the U.S. dollar has started to displace the Canadian dollar as a preferred unit of account. A cross-section of firms was asked what currency (or currencies) they used: (i) for quoting sales to Canadian customers, (ii) for quoting prices to foreigners, (iii) for reporting their financial results, and (iv) for quoting salaries and wages. The survey results reported here extend some earlier results reported in a previous Review article by Murray and Powell. The data indicate that, despite the dominance of the U.S. dollar in world trade and as an international standard of value, use of the U.S. dollar in Canada is very limited. The vast majority of Canadian firms price their products and keep their financial statements in Canadian dollars, and very few workers in Canada have their salaries paid in a foreign currency. The Canadian dollar is still strongly preferred for most pricing and financial-reporting activities in Canada, and there is very little evidence of "dollarization."
    Content Type(s): Publications, Bank of Canada Review articles Topic(s): Exchange rate regimes
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