April 20, 2005 The Bank of Canada's 2004 research conference examined the real and financial linkages between the Canadian economy and the economies in the rest of the world. Although Canada has profited enormously from its openness to international trade in goods, services, and financial assets, many of the most significant shocks to the Canadian economy in recent years have come from abroad. For these reasons, understanding the extent and nature of the external linkages, their implications for the Canadian economy, and the process by which the Canadian economy adjusts to external shocks is of critical importance both for monetary policy and for monitoring the financial system. This article describes the purpose of the conference—to deepen economists' understanding of these important issues—and provides highlights of the papers presented in each of the five sessions, as well as summaries of the keynote lecture and the discussion of the policy panel.
Do Exchange Rates Affect the Capital-Labour Ratio? Panel Evidence from Canadian Manufacturing IndustriesUsing industry-level data for Canadian manufacturing industries from 1981 to 1997, the authors find empirical evidence of a negative relationship between the capital-labour ratio and the user cost of capital relative to the price of labour.