Order Submission: The Choice between Limit and Market Orders Staff Working Paper 2005-42 Ingrid Lo, Stephen Sapp Most financial markets allow investors to submit both limit and market orders, but it is not always clear what affects the choice of order type. Content Type(s): Staff research, Staff working papers Topic(s): Exchange rates, Financial institutions, Market structure and pricing JEL Code(s): D, D4, G, G1
The Exchange Rate and Canadian Inflation Targeting Staff Working Paper 2005-34 Christopher Ragan The author provides a non-technical explanation of the role played by the exchange rate in Canada's inflation-targeting monetary policy. Content Type(s): Staff research, Staff working papers Topic(s): Exchange rates, Inflation targets, Monetary policy implementation JEL Code(s): E, E5, E50, E52, F, F4, F41
October 25, 2005 Exports, Imports, and the Appreciation of the Canadian Dollar Bank of Canada Review - Autumn 2005 Richard Dion, Michel Laurence, Yi Zheng An objective assessment of the effects of the appreciation of the Canadian dollar in 2003 and 2004 on exports and imports requires a detailed review of the numerous other factors which may have been at play. Dion, Laurence, and Zheng discuss the influences that have affected Canada's international trade over the past two years, including exchange rate movements, global and sector-specific shocks, constraints on the domestic supply of a few products, and competition from emerging economies, most notably, China. The analysis is complemented with econometric models developed at the Bank which provide statistically valid estimates of the contribution of the Canadian-dollar appreciation to the recent developments in exports and imports. Content Type(s): Publications, Bank of Canada Review articles Topic(s): Balance of payments and components, Exchange rates, International topics
October 22, 2005 How the Appreciation of the Canadian Dollar Has Affected Canadian Firms: Evidence from the Bank of Canada Business Outlook Survey Bank of Canada Review - Autumn 2005 Jean Mair To track how firms were affected by the appreciation of the Canadian dollar in 2003 and 2004 and the steps they took in response, the Bank included supplementary questions in the quarterly Business Outlook Survey conducted by its regional offices. About half of the firms surveyed reported being adversely affected, one-quarter experienced a favourable impact, and the remainder reported no effect. Jean Mair classifies and summarizes the firms' responses, identifying the sectors that were most and least affected. Causes of the impacts are identified, as well as the actions firms took as a result of the appreciation. The article looks at these actions over time to see what they tell us about firms' adjustment process. Content Type(s): Publications, Bank of Canada Review articles Topic(s): Balance of payments and components, Exchange rates, Recent economic and financial developments
October 18, 2005 What Drives Movements in Exchange Rates? Bank of Canada Review - Autumn 2005 Jeannine Bailliu, Michael R. King Understanding what causes the exchange rate to move has been on ongoing challenge for economists. Despite extensive research, traditional macro models of exchange rate determination—with the exception of the Bank of Canada's exchange rate equation—have typically not fared well, motivating economists to explore new ways to model exchange rate movements that incorporate more complex and realistic settings. Within the context of the sharp appreciation of the Canadian dollar in 2003 and 2004, Bailliu and King review the macroeconomic models of exchange rates, as well as the micro-structure studies that highlight the importance of trading mechanisms, information asymmetry, and investor heterogeneity for explaining short-term dynamics in exchange rates. In addition to summarizing the current state of knowledge, they highlight recent advances and identify promising alternative approaches. Content Type(s): Publications, Bank of Canada Review articles Topic(s): Economic models, Exchange rates, Financial markets
October 5, 2005 The Exchange Rate and Canadian Inflation Targeting Bank of Canada Review - Autumn 2005 Christopher Ragan An essential element of the Bank of Canada's inflation-targeting framework is a floating exchange rate that is free to adjust in response to shocks that affect the Canadian and world economies. This floating rate plays an important role in the transmission mechanism for monetary policy. A practical question is how the Bank of Canada incorporates currency movements into the monetary policy decision-making process. Only after determining the cause and persistence of exchange rate change, and its likely net effect on aggregate demand, can the Bank decide on the appropriate policy response to keep inflation low, stable, and predictable. Ragan reviews the need to target inflation and the transmission mechanism for monetary policy, including the role of the exchange rate, before describing two types of exchange rate movements and their implications for monetary policy. Content Type(s): Publications, Bank of Canada Review articles Topic(s): Exchange rates, Inflation targets, Monetary policy implementation
Has Exchange Rate Pass-Through Really Declined in Canada? Staff Working Paper 2005-29 Hafedh Bouakez, Nooman Rebei Several empirical studies suggest that exchange rate pass-through has declined in recent years in industrialized countries. Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Economic models, Exchange rates, Inflation and prices, International topics JEL Code(s): F, F3, F4
The Effects of the Exchange Rate on Investment: Evidence from Canadian Manufacturing Industries Staff Working Paper 2005-22 Tarek Harchaoui, Faouzi Tarkhani, Terence Yuen Using industry-level data for 22 Canadian manufacturing industries, the authors examine the relationship between exchange rates and investment during the period 1981–97. Content Type(s): Staff research, Staff working papers Topic(s): Domestic demand and components, Exchange rates JEL Code(s): D, D2, D24, F, F4
The Effectiveness of Official Foreign Exchange Intervention in a Small Open Economy: The Case of the Canadian Dollar Staff Working Paper 2005-21 Rasmus Fatum, Michael R. King The Bank of Canada is one of very few central banks that has made records of the intraday timing of its intervention operations available to researchers. Content Type(s): Staff research, Staff working papers Topic(s): Exchange rates, Financial markets JEL Code(s): E, E5, E58, F, F3, F31, G, G1, G14, G15
Labour Market Adjustments to Exchange Rate Fluctuations: Evidence from Canadian Manufacturing Industries Staff Working Paper 2005-14 Danny Leung, Terence Yuen The authors provide some of the first empirical evidence on labour market adjustments to exchange rate movements in Canadian manufacturing industries. Content Type(s): Staff research, Staff working papers Topic(s): Exchange rates, Labour markets JEL Code(s): E, E2, E23, F, F4