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Staff research, Publications



  • November 12, 1997

    Clearing and settlement systems and the Bank of Canada

    Bank of Canada Review - Autumn 1997 Clyde Goodlet
    Clearing and settlement systems are essential to the smooth functioning of a modern market-based economy such as Canada's. During the past decade, there have been significant efforts in Canada and abroad to improve electronic clearing and settlement systems that handle payments obligations, either uniquely or in conjunction with transactions related to the purchase and sale of a broad range of financial instruments such as debt, equity, foreign exchange, or derivatives. This article examines some of the risks faced by participants and end-users of these systems and reviews the Bank of Canada's role in relation to these systems. For a number of years, the Bank has been involved informally with major clearing and settlement systems with a view to ensuring that systemic risk is adequately controlled. In July 1996, the Payment Clearing and Settlement Act was proclaimed. This Act formalized the role of the Bank in the oversight of clearing and settlement systems for the purpose of controlling systemic risk. The article provides an overview of the Bank's responsibilities. It also describes certain new powers that the Act made available to the Bank that could be exercised in its dealings with clearing and settlement systems.
    Content Type(s): Publications, Bank of Canada Review articles Research Topic(s): Payment clearing and settlement systems

  • Modelling the Behaviour of U.S. Inventories: A Cointegration-Euler Approach

    Staff Working Paper 1997-19 Iris Claus
    Cyclical contractions are often referred to as inventory cycles, in part because movements in inventories can amplify cyclical fluctuations in output. An unanticipated slowing in demand generally leads to an unintended buildup of inventories: only with a lag do firms adjust production and their actual holding of inventories relative to the desired level.
    Content Type(s): Staff research, Staff working papers Research Topic(s): International topics JEL Code(s): E, E2, E22

  • A Measure of Underlying Inflation in the United States

    Staff Working Paper 1997-20 Iris Claus
    A monetary authority with the primary objective of price stability has to distinguish between temporary price shocks and persistent shocks to the rate of inflation. A measure of underlying inflation, therefore, has an important role to play as a guideline for monetary policy.
    Content Type(s): Staff research, Staff working papers Research Topic(s): Inflation and prices, International topics JEL Code(s): E, E3, E31

  • Les marchés du travail régionaux : une comparaison entre le Canada et les États-Unis

    Staff Working Paper 1997-17 Mario Lefebvre
    The purpose of this study is to compare the behaviour of regional labour markets in Canada and the United States. The study shows that the degree of persistence of unemployment is significantly higher in the provinces of Canada than it is in the various American regions.
    Content Type(s): Staff research, Staff working papers Research Topic(s): Labour markets, Recent economic and financial developments JEL Code(s): E, E2, E24
  • August 14, 1997

    The fiscal impact of privatization in Canada

    Bank of Canada Review - Summer 1997 Mylène Levac, Philip Wooldridge
    Privatization—the transfer of activities from the public to the private sector—gained international prominence in the 1980s because of the need to reduce budget deficits and growing concerns about the efficiency of state-owned enterprises and government bureaucracies. This article examines privatization in Canada and its effect on governments' fiscal positions. Privatization has generally been less rapid and extensive in Canada than elsewhere, partly because of the comparatively moderate size of our public sector. Nevertheless, federal, provincial, and municipal governments have increasingly reduced their direct involvement in the Canadian economy by selling Crown corporations, contracting with private firms to deliver public services, and transferring the development of public infrastructure projects to the private sector. The fiscal impact of privatizing Crown corporations varies with such factors as the profitability of the enterprise, the size of the government's initial investment, and past write-downs. In general, when privatizations are part of a broader effort to improve public finances, they can contribute to fiscal consolidation by reducing budgetary requirements and debt levels. When services and infrastructure projects are privatized, it is expected that more efficient private sector management will reduce government expenditures. For example, a private consortium may be better able to manage the financial risks involved in building an infrastructure facility, such as cost overruns or the withdrawal of contractors, than the public sector. The key to raising efficiency and lowering costs, however, is competition, not privatization per se. Therefore, the cost savings arising from the privatization of services or public works depend crucially on the terms of the contract. Overall, when structured to improve economic efficiency, privatization is likely to enhance the economy's performance, thereby producing long-term economic and budgetary gains.
    Content Type(s): Publications, Bank of Canada Review articles Research Topic(s): Fiscal policy
  • August 13, 1997

    The new bank note distribution system

    Bank of Canada Review - Summer 1997 Gerrit Bilkes
    In this article, the author outlines the recent changes made to the way Canada's bank notes are distributed. The new system allows financial institutions to exchange notes directly with one another at designated points across the country, rather than through Bank of Canada agencies, as was previously the case. The institutions communicate with the Bank of Canada through a computerized inventory-management system. Two Bank of Canada operations centres monitor note quality and supply new notes to the financial institutions. While the Bank continues to maintain firm control over the distribution of Canada's bank notes, the management of information rather than physical notes will improve efficiency and allow significant cost savings to the Bank of Canada and to the government.
    Content Type(s): Publications, Bank of Canada Review articles Research Topic(s): Bank notes, Financial institutions

  • Measurement of the Output Gap: A Discussion of Recent Research at the Bank of Canada

    Technical Report No. 79 Pierre St-Amant, Simon van Norden
    In this paper, we discuss some methodologies for estimating potential output and the output gap that have recently been studied at the Bank of Canada. The assumptions and econometric techniques used by the different methodologies are discussed in turn, and applications to Canadian data are presented.
    Content Type(s): Staff research, Technical reports Research Topic(s): Potential output JEL Code(s): D, D2, D24

  • Canadian Short-Term Interest Rates and the BAX Futures Market: Analysis of the Impact of Volatility on Hedging Activity and the Correlation of Returns between Markets

    Staff Working Paper 1997-18 David Watt
    This paper analyses how Canadian financial firms manage short-term interest rate risk through the use of BAX futures contracts. The results show that the most effective hedging strategy is, on average, a static strategy based on linear regression that assumes constant variances, even though dynamic models allowing for time-varying variances are found to have superior explanatory power.
    Content Type(s): Staff research, Staff working papers Research Topic(s): Financial markets, Interest rates JEL Code(s): E, E4, E43
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