Research
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Exchange Rate Volatility and Trade: A Survey
This paper provides an extensive survey of the literature on exchange rate volatility and trade, examining both the theory that underlies the work in this area and the results of empirical studies published since 1988. -
An Up-to-Date and Improved BVAR Model of the Canadian Economy
In this paper, we estimate a fully optimized BVAR model of the Canadian economy for the period 1971-87. The model is well-adapted to the features of a small open economy. We show how it can be used as an input in the monetary policy process either as a forecasting instrument or an analytical tool. -
The Term Structure and Real Activity in Canada
This paper examines the predictive content of the term structure of interest rates for economic activity in Canada. Recent papers for the United States and other countries find that the slope of the term structure is a very good predictor of output growth. -
The Microstructure of Financial Derivatives Markets: Exchange-Traded versus Over-the-Counter
In this report the author focusses on the microstructure of derivatives markets. While the primary objective is to examine derivatives markets in Canada, the author also discusses certain developments in global derivatives markets that are bound to influence the functioning and development of financial markets in a small, open economy such as Canada's. It is […] -
A Further Analysis of Exchange Rate Targeting in Canada
In a recent paper Mercenier and Sekkat (1988) conclude that the Bank of Canada has followed a policy of exchange rate targeting using the money supply. We re-examine their results using a different estimation approach and with different assumptions about the forcing process of the exogenous variables. -
Optimum Currency Areas and Shock Asymmetry: A Comparison of Europe and the United States
Since the early 1980s, models based on economic fundamentals have been poor at explaining the movements in the exchange rate (Messe 1990). In response to this problem, Frankel and Froot (1988) developed a model that uses two approaches to forecast the exchange rate: the fundamentalist approach, which bases the forecast on economic fundamentals, and the chartist approach, which bases the forecast on the past behaviour of the exchange rate. -
The Role of House Prices in Regional Inflation Disparities
Theoretically, house prices will reveal greater disparities between regions than prices for more easily tradable goods and services. This contributes to regional disparities in inflation. In this report the author reviews a range of factors that are likely to cause greater disparities in house price inflation than in the price inflation of other goods and […] -
Les sources des fluctuations des taux de change en Europe et leurs implications pour l'union monétaire
The objective of this paper is to provide an empirical evaluation of the degree of shock asymmetry between eight European countries that would form the core of a monetary union. Given that the relevant measure is the degree of real shock asymmetry, our approach is to use the observed movement in real exchange rates as […]
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