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145 Results

The Exchange Rate Regime and Canada's Monetary Order

Staff Working Paper 1999-7 David Laidler
It is a mistake to debate the merits of alternative exchange rate regimes for Canada independently of other features of the monetary order. A coherent order requires a well-defined goal for monetary policy, one that the authorities are capable of achieving, and that anchors private sector expectations. For it to be liberal, the relevant authorities […]
Content Type(s): Staff research, Staff working papers Topic(s): Exchange rates, Monetary policy framework JEL Code(s): E, E5, E52, F, F3, F31

An Intraday Analysis of the Effectiveness of Foreign Exchange Intervention

Staff Working Paper 1999-4 Neil Beattie, Jean-François Fillion
This paper assesses the effectiveness of Canada's official foreign exchange intervention in moderating intraday volatility of the Can$/US$ exchange rate, using a 2-1/2-year sample of 10-minute exchange rate data. The use of high frequency data (higher than daily frequency) should help in assessing the impact of intervention since the foreign exchange market is efficient and […]
Content Type(s): Staff research, Staff working papers Topic(s): Exchange rates, Financial markets JEL Code(s): F, F3, F31, G, G1, G15
November 13, 1998

Currency crises and fixed exchange rates in the 1990s: A review

Currency crises in the 1990s, especially those in emerging markets, have sharply disrupted economic activity, affecting not only the country experiencing the crisis, but also those with trade, investment, and geographic links. The authors review the theoretical literature and empirical evidence regarding these crises. They conclude that their primary cause is a fixed nominal exchange rate combined with macroeconomic imbalances, such as current account or fiscal deficits, that the market perceives as unsustainable at the prevailing real exchange rate. They also conclude that currency crises can be prevented through the adoption of sound monetary and fiscal policies, effective regulation and supervision of the financial sector, and a more flexible nominal exchange rate.

Fundamentals, Contagion and Currency Crises: An Empirical Analysis

Staff Working Paper 1998-10 Mark Kruger, Patrick Osakwe, Jennifer Page
This paper examines the determinants of currency crises in Latin America, Asia and Africa. It asks two basic questions: (a) Are currency crises linked to economic fundamentals? and; (b) Is there any evidence of a contagion effect after controlling for the potential effects of economic fundamentals? Using pooled annual data for 19 developing countries spanning […]
Content Type(s): Staff research, Staff working papers Topic(s): Exchange rates JEL Code(s): F, F3
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.
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.

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.
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