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2339
result(s)
Why Canada Needs a Flexible Exchange Rate
Staff Working Paper 1999-12
John Murray
This paper explores the arguments for and against a common currency for Canada and the United States and attempts to determine whether such an arrangement would offer any significant advantages for Canada compared with the present flexible exchange rate system. The paper first reviews the theoretical arguments advanced in the economics literature in support of fixed and flexible currency arrangements. A discussion of Canada's past experience with the two exchange rate systems follows, after which there is a survey of the empirical evidence published on Canada's current and prospective suitability for some form of fixed currency arrangement with the United States. The final section of the paper examines critically a number of concerns raised about the behaviour of the current flexible exchange rate system.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Exchange rates
JEL Code(s):
F,
F3,
F31
Liquidity of the Government of Canada Securities Market: Stylized Facts and Some Market Microstructure Comparisons to the United States Treasury Market
Staff Working Paper 1999-11
Toni Gravelle
The aims of this study are to examine how liquidity in the Government of Canada securities market has evolved over the 1990s and to determine what factors influence the level of liquidity in this market, with some comparisons to the U.S. Treasury securities market. We find empirical support for the hypothesis that an increase in […]
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Financial markets
JEL Code(s):
D,
D4,
G,
G1,
G2
May 15, 1999
Recent developments in the monetary aggregates and their implications
In its conduct of monetary policy, the Bank of Canada carefully monitors the pace of monetary expansion for indications about the outlook for inflation and economic activity. In recent years, a number of factors have distorted the growth of the traditional broad and narrow aggregates. In this article, the authors discuss the uncertainty surrounding the classification of deposit instruments that has resulted from the elimination of reserve requirements and from other financial innovations. They introduce two new measures of transactions balances, M1+ and M1++ (described more fully in a technical note in this issue of the Review), that internalize some of the substitutions that have occurred. They attribute the deceleration in M1 growth in 1998 partly to the declining influence of special factors, partly to a lagged response to interest rate increases in 1997 and early 1998, and partly to some temporary tightening in credit conditions in the autumn of 1998. The broad monetary aggregate M2++, which includes all personal savings deposits, life insurance annuities, and mutual funds, grew at a steady pace in 1998, presaging growth of about 4 to 5 per cent in total dollar spending and inflation inside the target range.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Monetary aggregates
May 14, 1999
Open outcry and electronic trading in futures exchanges
Despite the efficiency gains that accompany automation, most large futures exchanges have been reluctant to move away from the traditional trading floor, citing early evidence that open outcry exchanges were more liquid than electronic exchanges. More recent studies, however, suggest that electronic trading is superior to open outcry in many respects, including liquidity. In this article, the author compares the two trading systems. Although many exchanges are shifting towards electronic trading, there are still several obstacles to this transition. But as technology rapidly reduces the cost of automation and increases the demand for global 24-hour trading, a worldwide transition to electronic order-matching will likely be the next important milestone for futures exchanges. Less-automated exchanges (including the Canadian futures exchanges) will undoubtedly continue to study and promote automation in order to keep pace with technological innovations.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Financial markets
Uncovering Inflation Expectations and Risk Premiums From Internationally Integrated Financial Markets
Staff Working Paper 1999-6
Ben Fung,
Scott Mitnick,
Eli Remolona
Theory and empirical evidence suggest that the term structure of interest rates reflects risk premiums as well as market expectations about future inflation and real interest rates. We propose an approach to extracting such premiums and expectations by exploiting both the comovements among interest rates across the yield curve and between two countries, Canada and […]
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Financial markets,
Inflation and prices,
Interest rates,
International topics
JEL Code(s):
E,
E4,
E43,
G,
G1,
G12,
G15
Real Effects of Collapsing Exchange Rate Regimes: An Application to Mexico
Staff Working Paper 1999-10
Patrick Osakwe,
Lawrence L. Schembri
This paper examines the impact of a collapsing exchange rate regime on output in an open economy in which shocks to capital flows and exports predominate. A sticky-price rational expectations model is used to compare the variability of output under the collapsing regime to that under alternative fixed and flexible regimes. Output is found to […]
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Exchange rates
JEL Code(s):
F,
F3,
F31,
F4,
F41
Measuring Potential Output within a State-Space Framework
Staff Working Paper 1999-9
Maral Kichian
In this paper we measure potential output (and consequently the output gap) using state-space models. Given that the estimated output gap is used as an indicator to measure the extent of inflationary pressures in the economy, we evaluate the use of such models for the implementation of monetary policy. Our starting point is the Gerlach […]
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Potential output
JEL Code(s):
D,
D2,
D24
Monetary Rules When Economic Behaviour Changes
Staff Working Paper 1999-8
Robert Amano,
Donald Coletti,
Tiff Macklem
This paper examines the implications of changes in economic behaviour for simple inflation-forecast–based monetary rules of the type currently used at two inflation-targeting central banks. Three types of changes in economic behaviour are considered, changes that are motivated by developments in monetary and fiscal policy in the 1990s: changes in monetary policy credibility, changes in […]
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Credibility,
Monetary policy and uncertainty,
Monetary policy framework
JEL Code(s):
E,
E5,
E52
The Quantity of Money and Monetary Policy
Staff Working Paper 1999-5
David Laidler
The relationships among the quantity theory of money, monetarism and policy regimes based on money-growth and inflation targeting are briefly discussed as a prelude to an exposition of alternative views of money's role in the transmission mechanism of monetary policy. The passive-money view treats the money supply as an endogenous variable that plays no role […]
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Monetary aggregates,
Monetary policy framework,
Monetary policy transmission
JEL Code(s):
E,
E5,
E51,
E52