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8226 Results

November 9, 1995

The effect of foreign demand shocks on the Canadian economy: An analysis using QPM

Historically, rapid and unsustainable increases in the demand for goods and services originating within the economies of Canada's major trading partners have had a significant impact on the domestic economy. These episodes are typically characterized by increases in world commodity prices and by a tightening of monetary conditions abroad to contain inflationary pressures. In this article, the author uses the Bank's quarterly projection model (QPM) (described in the autumn 1994 issue of the Review) to trace the mechanisms that transmit these foreign developments throughout the Canadian economy. In addition, he outlines the response that is required from domestic monetary authorities to maintain a target rate of inflation.
November 8, 1995

The role of monetary conditions and the monetary conditions index in the conduct of policy

In these excerpts from a presentation to a conference in Toronto, Deputy Governor Charles Freedman analyses the way in which the monetary conditions index (MCI) enters into the Bank's thinking and actions. He describes how the Bank works in the context of a forward-looking assessment of economic developments and inflationary pressures to decide upon a desired path for the MCI that will result in a rate of inflation, six to eight quarters ahead, that is within the Bank's target band. Mr. Freedman also uses specific examples to explain how various shocks to the economy can change the Bank's desired path for monetary conditions. He describes the role that tactical considerations relating to market circumstances play regarding the timing of Bank actions to bring monetary conditions onto the desired path and emphasizes the need to give precedence to steadying nervous markets.

Long-Run Demand for M1

Staff Working Paper 1995-11 Scott Hendry
The goal of this paper is to investigate and estimate long-run relationships among M1, prices, output and interest rates, with a view to determining if there is a stable relationship that can be interpreted as long-run money demand. The paper uses a maximum-likelihood multiple-equation cointegration technique, developed by Johansen, to fit a system of equations […]

The Canadian Experience with Weighted Monetary Aggregates

Staff Working Paper 1995-10 David Longworth, Joseph Atta-Mensah
This paper compares the empirical performance of Canadian weighted monetary aggregates (in particular, Fisher ideal aggregates) with the current summation aggregates, for their information content and forecasting performance in terms of prices, real output and nominal spending for the period 1971Q1 to 1989Q3. The properties of money-demand equations for these aggregates, particularly their temporal stability, […]

Selection of the Truncation Lag in Structural VARs (or VECMs) with Long-Run Restrictions

Staff Working Paper 1995-9 Alain DeSerres, Alain Guay
authors examine the issue of lag-length selection in the context of a structural vector autoregression (VAR) and a vector error-correction model with long-run restrictions. First, they show that imposing long-run restrictions implies, in general, a moving-average (MA) component in the stationary multivariate representation. Then they examine the sensitivity of estimates of the permanent and transitory […]

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
August 10, 1995

Aspects of economic restructuring in Canada, 1989-1994

The way in which Canadian firms produce goods and services has changed dramatically during the 1990s. A major feature of this restructuring has been a shift towards greater use of capital goods, particularly computer-based technology, relative to labour in production processes. The author examines this phenomenon from a macroeconomic perspective, identifying the principal factors behind the trends in investment and employment since the late 1980s. The analysis focusses on the relative costs of capital and labour over the period and on their implications for output and employment.
August 9, 1995

Uncertainty and the transmission of monetary policy in Canada (HERMES-Glendon Lecture)

Gordon Thiessen, Governor of the Bank of Canada, delivered the HERMES-Glendon Lecture at York University, Toronto, in March 1995. The speech focussed on the interrelationships of uncertainty and the transmission of monetary policy to the economy. It looked at how the various types of uncertainty influence the behaviour of economic actors, and at how uncertainty affects the transmission of monetary policy through the economy. The first part of the lecture outlines the Bank of Canada's view of the transmission mechanism, with considerable attention paid to the role of uncertainty. In the second part, the various ways in which the Bank has tried to reduce uncertainty are discussed. The various kinds of uncertainty that impinge on the economy and on the policy process are addressed.

Analytical Derivatives for Markov Switching Models

Staff Working Paper 1995-7 Jeff Gable, Simon van Norden, Robert Vigfusson
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 […]
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