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We develop a model with firm heterogeneity in importing and cross-border shopping among consumers. Exchange-rate appreciations lower the cost of imported goods, but also lead to more cross-border shopping; hence, the net impact on aggregate retail prices and sales is ambiguous.

This paper relaxes the Bayesian Nash equilibrium (BNE) assumption commonly imposed in empirical discrete choice games with incomplete information. Instead of assuming that players have unbiased/correct expectations, my model treats a player’s belief about the behavior of other players as an unrestricted unknown function. I study the joint identification of belief and payoff functions.

Most models in finance assume that agents make trading plans over the infinite future. We consider instead that they are boundedly rational and may only form forecasts over a limited horizon.

There have been a number of significant economic and financial developments since the time of the July Monetary Policy Report Update.

The paper examines how the Balassa-Samuelson hypothesis is affected by a modern variation of the standard model that allows product differentiation (within the traded and nontraded goods sectors) with the number of firms determined exogenously or endogenously.

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.

In 2005, the Bank of Canada celebrated its 70th anniversary. Since the Bank opened its doors in March 1935, it has evolved into a national institution at the heart of Canada’s economy. We had a lot to celebrate in 2005—particularly our progress over the past 70 yearsand our continuing contribution to the economic and financial well-being of Canadians.

We assess how much the recent rate-hike cycle has and will affect mortgage borrowers' consumption through its impacts on mortgage payments. Our analysis provides insights into the effects of changes in monetary policy on the consumption of mortgage borrowers.

This Report outlines recent developments in the Canadian economy that affect the rate of inflation and provides an account of the measures taken by the Bank of Canada to control inflation.

In 1996 inflation remained within the Bank’s target range but was subject to downward pressure. The low rate of inflation contributed to a major easing in monetary conditions, and interest rates reached their lowest level in 30 years.