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Bank of Canada Governor David Dodge today spoke about the policies that governments around the world need to adopt in order to bring about an orderly resolution to global economic imbalances.

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.

Governor Tiff Macklem explains that higher interest rates are working to slow inflation but warns that getting all the way back to the 2% target may take time. He also discusses the recent stress in the global banking sector and how financial stability and price stability work together.

Good afternoon, Mr. Chairman and committee members. Senior Deputy Governor Wilkins and I are happy to be before you today to discuss the Bank’s Monetary Policy Report (MPR), which we published last week. When we were last here in April, we were celebrating the fact that we had upgraded our economic forecast following a long […]

This note investigates whether Canadian corporate spreads and the excess bond premium (EBP) lead Canadian economic activity. Indeed, we find that corporate spreads precede changes in real gross domestic product (GDP) in Canada over the subsequent year. The EBP accounts for most of this property. Further, an unanticipated increase in the Canadian EBP forecasts a deterioration of domestic macroeconomic conditions: a 10-basis-point increase results in a fall in both GDP and consumer price index (CPI) of 0.4 per cent and 0.1 per cent, respectively, over three years.

Proceedings of a conference held by the Bank of Canada, November 2000 (proceedings volume, available in electronic format only)

The Bank of Canada today held its target for the overnight rate at 2.25%, with the Bank Rate at 2.5% and the deposit rate at 2.20%.

We evaluate, both empirically and theoretically, the spillover effects that debt-financed fiscal policy interventions of the United States have on other economies. We consider a two-country model with international portfolio rebalancing effects. We show that US fiscal expansions would increase global long-term rates and hinder economic activity in the rest of the world.

This monthly newsletter features the latest research publications by Bank of Canada economists including external publications and working papers published on the Bank of Canada’s website.

In this paper, we assess several methods that have been used to measure the Canadian trend unemployment rate (TUR). We also consider improvements and extensions to some existing methods.