• August 28, 2001

    Bank of Canada lowers key policy interest rate by 1/4 percentage point to 4 per cent

    The Bank of Canada today announced that it is lowering its target for the overnight rate* by one-quarter of one percentage point to 4 per cent. The operating band for the overnight rate is correspondingly lowered, and the Bank Rate is now 4 1/4 per cent. With today's action, the total reduction in interest rates by the Bank this year amounts to 1 3/4 percentage points.
    Content Type(s): Press, Press Releases
  • August 17, 2001

    The Changing Effects of Energy-Price Shocks on Economic Activity and Inflation

    In this article the author examines the effects that major changes in energy prices in recent years have had on inflation and on the pace of economic expansion. These are then compared with the effects of the oil-price shocks that occurred in the 1970s and early 1980s. Changes in the intensity of energy use are examined, as well as developments in Canada's merchandise trade surplus in energy commodities and products. The author also considers the effects that a monetary policy anchored to low and stable inflation could have on price-setting behaviour and thus on the pass-through of higher energy costs to core inflation in Canada and in other industrial countries.
  • August 17, 2001

    Bank of Canada Review - Summer 2001

    BoC Review - Summer 2001

    Cover page

    Trade Silver

    The objects featured on the cover range in size from 1 to 2.5 inches in width. They form part of the National Currency Collection, Bank of Canada.

    Photography by James Zagon.

  • August 16, 2001

    Innovation and Competition in Canadian Equity Markets

    Innovations in communications and information technology and the related globalization of financial markets have created the potential for important changes to the structure of Canadian equity markets. Established marketplaces can now compete more effectively on an inter-regional and international basis. At the same time, reduced costs have lowered the barriers to entry faced by new competitors known as alternative trading systems (ATSs). In response to this heightened competition, established Canadian stock exchanges have taken measures to improve market quality. While regulators see innovation as positive for the development of Canadian markets, there is some concern that market liquidity may be fragmented in the short run. The Canadian Securities Administrators have proposed a framework that attempts to address this issue and that would allow ATSs to compete with traditional exchanges for the first time. The authors provide an overview of the Canadian equity market and its structure, focusing on these recent developments.
  • August 15, 2001

    Analyzing the Monetary Aggregates

    In recent years, the Bank has put renewed emphasis on analyzing monetary variables and on developing models that incorporate money as an active part of the transmission mechanism. In this article, Dinah Maclean describes how the monetary aggregates are used in the formulation of monetary policy analysis at the Bank, outlining the key tools and models used. The most important money-based model currently in use is the M1-VECM. In this model, deviations in the money supply from the long-term demand for money cause changes in inflation. The author briefly describes the "active-money" paradigm underlying this model and explains the key equations within it. Other simpler empirical models are also outlined, including single-equation indicator models for output based on the narrow aggregates, a neural network, and a model based on the broader aggregate M2++. A detailed technical annex provides details on model equations and coefficient values.
  • August 10, 2001

    Proposed Terms and Conditions for Auctions of Receiver General Cash Balances

    On behalf of the Minister of Finance, the Department of Finance and Bank of Canada are releasing today draft terms and conditions for participation in Receiver General auctions. These auctions are the means by which the government invests its short-term Canadian dollar cash balances.
    Content Type(s): Press, Market Notices
  • August 9, 2001

    Expansion of List of Securities Eligible as Collateral for use in Bank of Canada Standing Liquidity Facility

    Under its Standing Liquidity Facility (SLF), the Bank of Canada is prepared to provide liquidity on a daily basis to financial institutions that participate directly in the payment systems operated by the Canadian Payments Association - the Automated Clearing Settlement System (ACSS) and the Large Value Transfer System (LVTS).
    Content Type(s): Press, Market Notices
  • August 2, 2001

    Summer Market Consultations 2001

    Overview The objectives of debt strategy are to provide stable, low cost funding for the federal government, and to maintain and enhance a well-functioning market for Government of Canada securities. A key element of the strategy is to maintain a prudent debt structure, with approximately two-thirds of the debt stock in fixed-rate instruments. The Government […]
  • August 2, 2001

    Summer Consultations - Market Views Sought on Issues Relating to the Design and Operation of Government Debt Programs over 2001-02 and Beyond

    A consultation document on issues relating to the design and operation of government debt programs over 2001-2002 and beyond, prepared jointly by the Department of Finance and the Bank of Canada, is being made public today.
    Content Type(s): Press, Market Notices
  • Predetermined Prices and the Persistent Effects of Money on Output

    Staff Working Paper 2001-13 Michael Devereux, James Yetman
    This paper illustrates a model of predetermined pricing, where firms set a fixed schedule of nominal prices at the time of price readjustment, based on the work of Fischer (1977). This type of price-setting specification cannot produce any excess persistence in a fixed-duration model of staggered prices, but we show that with a probabilistic model of price adjustment, as in Calvo (1983), a predetermined pricing specification can produce excess persistence.
    Content Type(s): Staff Research, Staff Working Papers Topic(s): Transmission of monetary policy JEL Code(s): E, E3, E30

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