December 13, 1999
Annual Report, Bank of Canada Review, Bank of Canada Review articles, Books and monographs, Souvenir books, Business Outlook Survey, Financial System Review, Financial System Review articles, Monetary Policy Report, Quarterly Financial Report, Senior Loan Officer Survey
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November 17, 1999
Monetary Policy Report – November 1999
Since the May Report, the international economic environment has continued to improve. Economic activity abroad grew faster than expected, while inflation in the major economies remained subdued. -
November 16, 1999
The Corporate Bond Market in Canada
The Canadian corporate bond market has experienced a renaissance, in recent years, against a background of low inflation, reduced public borrowing, and the lowest levels of long-term interest rates in a generation. The authors examine the influences shaping the market and also compare the Canadian market with those of other countries. The increased level of activity in the market has been accompanied by the development of new products and by greater investor interest in instruments with higher returns and higher credit risk. A more dynamic Canadian corporate bond market is a welcome development since it offers borrowers an alternative source of funds, especially companies that have typically relied on the banking system and on the U.S. corporate bond market for financings involving higher levels of credit risk. -
November 16, 1999
Bank of Canada Review - Autumn 1999
Cover page
Canadian dairy tokens
These tokens are part of the National Currency Collection at the Bank of Canada.
Photography by James Zagon.
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November 15, 1999
Markets for Government of Canada Securities in the 1990s: Liquidity and Cross-Country Comparisons
In this article, the author reviews the factors behind the recent evolution of liquidity in the market for Government of Canada (GoC) securities. He finds that liquidity has been supported by changes in the structure of the market, notably the introduction and increasing size of benchmark bond issues. He also notes that while the GoC bond market has generally benefited from changes in market structure, liquidity in the treasury bill market has decreased since the mid-1990s, largely because of the declining supply of these securities. This article also presents some comparisons of liquidity in the government securities markets of other industrialized countries and finds that liquidity in the Canadian market appears to compare favourably with all but the large U.S. Treasury market. -
November 14, 1999
Real Exchange Rate Indexes for the Canadian Dollar
In this article, the authors explain the methodology used to construct real exchange rate (RER) indexes. They also compare and assess various Canadian RER indexes from both an empirical and conceptual standpoint. The authors conclude that both theory and empirical evidence suggest that the best RER indexes are those based on unit labour costs. They note, however, that, for practical reasons, policy-makers should also consider RER indexes based on prices when formulating monetary policy. -
August 15, 1999
Recent Developments: An Update to the Monetary Policy Report
Highlights * Despite some lingering uncertainties on the global scene, developments since the May 1999 Monetary Policy Report have resulted in a firmer tone in the outlook for the world economy and for Canada. * The Canadian economy now appears poised to attain growth in 1999 towards the upper end of the 2 3/4 to 3 3/4 per cent range set out in the May Report. * Trend inflation is still expected to edge up but to remain in the lower half of the Bank's inflation-control target range of 1 to 3 per cent. Information received since early July, when the update to the Monetary Policy Report was completed, continues to point to a generally firmer tone in the outlook for the world economy and for Canada. Nonetheless, lingering uncertainties on the global scene bear watching. In Japan, there are signs that the protracted economic recession may be coming to an end. In Europe, expectations of a pickup in the pace of expansion as the year progresses are becoming more widely held. Economic and financial conditions remain generally positive in those emerging-market economies in Southeast Asia and Latin America that are vigorously pursuing sound domestic policies. In the United States, real GDP rose by an estimated 2.3 per cent in the second quarter—below most expectations. A significant part of the slowdown, however, was attributable to a major inventory adjustment. Growth of real final domestic demand also decelerated, but remained strong at just under 4 per cent, following growth of over 6 per cent in the two previous quarters. Overall, the U.S. economy continues to operate at high levels, thereby heightening concerns about potential inflationary pressures. While inflation at both the retail and producer-price levels appears to be contained, with tight labour markets (employment was up strongly in July) signs of cost pressures have emerged recently, reflecting rising rates of labour compensation and slowing productivity growth. Here in Canada, indicators of domestic demand such as retail and wholesale trade, motor vehicle sales, housing activity, imports, and business investment plans all support a picture of solid expansion through the spring and summer months. Exports, after several quarters of very strong growth, remain at high levels, and economy-wide production data (e.g., monthly GDP at factor cost) through May also indicate a steady, solid pace of expansion. Moreover, world commodity prices have risen somewhat further recently, providing support to Canada’s resource sector. The prices of some key primary commodities produced in Canada (especially energy and base metals) have been among the fastest rising. And as anticipated, there was renewed employment growth in July, notably in full-time, paid jobs. On balance, recent data suggest that real GDP increased by about 3 1/2 per cent (annual rate) in the second quarter—broadly in line with expectations at the time of the July update. The 12-month rate of increase in the core CPI edged up to 1.7 per cent in June. As in the previous two months, the June increase was slightly higher than expected. This is partly because of the more rapid pass-through of the earlier exchange rate depreciation into retail prices. However, with slack still present in the economy, core inflation is expected to remain close to current levels, below the midpoint of the Bank’s 1 to 3 per cent target range, through the balance of 1999. Uncertainty about inflationary pressures in the United States and the possible implications for the stance of U.S. monetary policy, as well as shifts in international investment portfolios (encouraged by improving economic conditions overseas), have resulted in significant movements in financial markets in recent weeks. In July, the U.S. dollar weakened markedly against both the yen and the euro. While the Canadian dollar was softer against its U.S. counterpart for much of the last month, it has strengthened recently, supported by Canada’s low inflation and solid economic expansion and by firmer world commodity prices. Interest rates in Canada remain below those in the United States across all maturities, although the differentials have narrowed since early July. -
August 15, 1999
Bank of Canada Review - Summer 1999
Cover page
William Weir and the Silver Nuisance
The teapot is 10¼ inches high and 9½ inches wide and is part of the National Currency Collection at the Bank of Canada.
Photography by James Zagon.
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August 14, 1999
Passive Money, Active Money, and Monetary Policy
This article by the Bank's visiting economist examines the role of money in the transmission of monetary policy. Professor Laidler argues against the view of money as a passive variable that reacts to changes in prices, output, and interest rates but has no direct causative effect on them. He maintains that the empirical evidence supports the view of money playing an active role in the transmission mechanism. While he agrees that individual monetary aggregates can be difficult to read because of instabilities in the demand-for-money function, he argues that monetary aggregates, particularly those relating to transactions money, should have a more significant place in the hierarchy of policy variables that the Bank considers when formulating monetary policy. -
August 13, 1999
Recent Initiatives in the Canadian Market for Government of Canada Securities
The initiatives reviewed by the author were undertaken to ensure a liquid and well-functioning market for Government of Canada securities in light of the significant shift in the government's financial position. They include changes made in 1998 by the Bank of Canada and the government to the rules governing auctions and to the Bank's surveillance of the auction process, changes to the treasury bill and bond programs, and implementation of a pilot buyback program for Government of Canada marketable bonds. In addition, the Investment Dealers Association of Canada adopted a code of conduct for the secondary market. These initiatives were well received by the market and appear to have had a positive impact. The Bank and the government are, however, continuing their search for ways to maintain and enhance the efficiency of this market.