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172
result(s)
November 14, 1997
European economic and monetary union: Background and implications
The European Union, which currently consists of 15 states, occupies an important place among the advanced economies. The final stage of the European economic and monetary union (EMU) is scheduled to begin in January 1999 with the adoption of a common currency called the "euro." A decision on which countries will participate in the euro area in 1999 will be made next spring based in part on the achievement of the economic criteria laid out in the Maastricht Treaty. In this article, the authors, after a brief discussion of the historical background, cast some light on the institutional aspects of the EMU, on the formulation and implementation of economic policy, as well as on the internal and external effects of EMU completion. For Canada, the direct implications of the shift to the euro appear to be relatively modest, at least in the short run.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Exchange rates,
International topics,
Recent economic and financial developments
December 11, 1996
The impact of exchange rate movements on consumer prices
In the first, mostly theoretical, part of this article, the author analyses the factors that affect the pass-through of exchange rate movements to consumer prices. In the second part, she studies the recent Canadian experience in this area, starting from 1992. The analysis in the first part of the article is used to investigate why the depreciation of the Canadian dollar by almost 20 per cent between 1992 and 1994 did not produce as much of an increase in the inflation rate as predicted by conventional estimates of the exchange rate pass-through. The author first explains this phenomenon using the factors described in the theoretical part of the article: demand conditions, the costs of adjusting prices, and expectations about the depreciation's duration. She then examines the role of more specific factors, such as the abolition of customs duties on trade between Canada and the United States and the restructuring of the retail market. It is clear that the latter two factors helped neutralize the effect of the depreciation on prices.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Exchange rates,
Inflation and prices,
Monetary policy transmission
Excess Volatility and Speculative Bubbles in the Canadian Dollar: Real or Imagined?
Technical Report No. 76
John Murray,
Simon van Norden,
Robert Vigfusson
Greater intervention by the public sector is often proposed as a solution to the increased speculation and excessive price volatility thought to characterize today's competitive world financial system.
Content Type(s):
Staff research,
Technical reports
Topic(s):
Exchange rates
JEL Code(s):
C,
C4,
C40,
F,
F3,
F31
Exchange Rates and Oil Prices
Staff Working Paper 1995-8
Robert Amano,
Simon van Norden
This paper derives analytical gradients for a broad class of regime-switching models with Markovian state-transition probabilities. Such models are usually estimated by maximum likelihood methods, which require the derivatives of the likelihood function with respect to the parameter vector. These gradients are usually calculated by means of numerical techniques. The paper shows that analytical gradients […]
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Exchange rates
May 8, 1995
Exchange rate fundamentals and the Canadian dollar
Views in the economic literature on the main factors that influence exchange rates have evolved over time in response to economic developments and new trends in economic theory. This article provides a brief interpretative survey of the main theories of exchange rate determination. The factors that influence exchange rate developments are varied and complex. However, the authors show that the broad movements of the Canada-U.S. real exchange rate since the early 1970s can be captured by a simple equation that highlights the role of commodity prices and Canada-U.S. interest rate differentials. The equation is used to interpret the evolution of the real exchange rate over the last two decades. At times, the real exchange rate deviates significantly from what the equation would predict. One explanation is that the equation omits certain factors that can influence the exchange rate, particularly in the short run. These may include fiscal policy variables, international indebtedness, political uncertainty, and investor sentiments—factors that are difficult to quantify but that have been particularly relevant in recent years.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Exchange rates
Symétrie des chocs touchant les régions canadiennes et choix d'un régime de change
Staff Working Paper 1994-9
Alain DeSerres,
René Lalonde
The authors attempt to determine whether the primary advantage of the flexible exchange rate between Canada and the United States—the rapid adjustment of the real exchange rate following an asymmetrical shock—is as evident at the regional as at the national level.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Exchange rates
Exchange Rate Volatility and Trade: A Survey
Staff Working Paper 1994-5
Agathe Côté
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.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Exchange rates
A Further Analysis of Exchange Rate Targeting in Canada
Staff Working Paper 1994-2
Robert Amano,
Tony S. Wirjanto
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.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Exchange rates
Optimum Currency Areas and Shock Asymmetry: A Comparison of Europe and the United States
Staff Working Paper 1994-1
Nick Chamie,
Alain DeSerres,
René Lalonde
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.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Exchange rates,
Financial markets
JEL Code(s):
C,
C4,
C40,
G,
G1,
G12