Michael R. King - Latest

• October 18, 2005

  What Drives Movements in Exchange Rates?

  Bank of Canada Review - Autumn 2005 Jeannine Bailliu, Michael R. King

  Understanding what causes the exchange rate to move has been on ongoing challenge for economists. Despite extensive research, traditional macro models of exchange rate determination—with the exception of the Bank of Canada's exchange rate equation—have typically not fared well, motivating economists to explore new ways to model exchange rate movements that incorporate more complex and realistic settings. Within the context of the sharp appreciation of the Canadian dollar in 2003 and 2004, Bailliu and King review the macroeconomic models of exchange rates, as well as the micro-structure studies that highlight the importance of trading mechanisms, information asymmetry, and investor heterogeneity for explaining short-term dynamics in exchange rates. In addition to summarizing the current state of knowledge, they highlight recent advances and identify promising alternative approaches.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Economic models, Exchange rates, Financial markets
• August 24, 2004

  The Efficiency of Canadian Capital Markets: Some Bank of Canada Research

  Bank of Canada Review - Summer 2004 Scott Hendry, Michael R. King

  Capital markets and their related financial instruments make an important contribution to the welfare of Canadians. The Bank of Canada is interested in the efficient functioning of capital markets through each of its responsibilities for monetary policy, the financial system, and funds management. Hendry and King highlight the key findings of Bank research published over the past year that addresses capital market efficiency and summarize lessons that have been learned. The research conducted thus far suggests that Canadian capital markets are efficient for a capital market of Canada's size but are less diverse than the U.S. capital markets, indicating that there is room for improvement in certain areas.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Financial markets, Financial services, Interest rates, Market structure and pricing