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8929 Results

November 15, 1999

Markets for Government of Canada Securities in the 1990s: Liquidity and Cross-Country Comparisons

In this article, the author reviews the factors behind the recent evolution of liquidity in the market for Government of Canada (GoC) securities. He finds that liquidity has been supported by changes in the structure of the market, notably the introduction and increasing size of benchmark bond issues. He also notes that while the GoC bond market has generally benefited from changes in market structure, liquidity in the treasury bill market has decreased since the mid-1990s, largely because of the declining supply of these securities. This article also presents some comparisons of liquidity in the government securities markets of other industrialized countries and finds that liquidity in the Canadian market appears to compare favourably with all but the large U.S. Treasury market.

Pricing Interest Rate Derivatives in a Non-Parametric Two-Factor Term-Structure Model

Staff Working Paper 1999-19 John Knight, Fuchun Li, Mingwei Yuan
Diffusion functions in term-structure models are measures of uncertainty about future price movements and are directly related to the risk associated with holding financial securities. Correct specification of diffusion functions is crucial in pricing options and other derivative securities. In contrast to the standard parametric two-factor models, we propose a non-parametric two-factor term-structure model that […]
November 14, 1999

Real Exchange Rate Indexes for the Canadian Dollar

In this article, the authors explain the methodology used to construct real exchange rate (RER) indexes. They also compare and assess various Canadian RER indexes from both an empirical and conceptual standpoint. The authors conclude that both theory and empirical evidence suggest that the best RER indexes are those based on unit labour costs. They note, however, that, for practical reasons, policy-makers should also consider RER indexes based on prices when formulating monetary policy.

Estimating One-Factor Models of Short-Term Interest Rates

Staff Working Paper 1999-18 Des Mc Manus, David Watt
There currently exists in the literature several continuous-time one-factor models for short-term interest rates. This paper considers a wide range of these models that are nested into one general model. These models are approximated using both a discrete-time model and a model that accounts for aggregation effects over time, and are estimated by both the […]
Content Type(s): Staff research, Staff working papers Topic(s): Financial markets, Interest rates JEL Code(s): C, C5, C52, G, G1, G10
November 2, 1999

The Challenges for Canadian Monetary Policy in the Year 2000

Remarks Gordon Thiessen the Greater Charlottetown Area Chamber of Commerce Charlottetown, Prince Edward Island
Monetary policy actions take a relatively long time to affect the economy and inflation—anywhere between 12 to 24 months. Because of this, central banks must always look ahead and must put in place today the monetary conditions that are needed to help keep the economy on a sustainable path down the road. By 'sustainable' I mean a situation where economic growth and job creation are not at risk from rising inflation.

The Regulation of Central Securities Depositories and the Linkages between CSDs and Large-Value Payment Systems

Technical Report No. 87 Charles Freedman
This paper first describes the Bank of Canada's approach to the design of large-value clearing and settlement systems. It then examines the way the Bank has operated under the Payment Clearing and Settlement Act, passed by Parliament in July 1996.

Canada's Exchange Rate Regime and North American Economic Integration: The Role of Risk-Sharing Mechanisms

Staff Working Paper 1999-17 Zahir Antia, Ramdane Djoudad, Pierre St-Amant
Our contribution in this paper is threefold. First, we survey the empirical literature on consumption smoothing mechanisms of regional economic shocks. Second, building on the work of Asdrubali et al. (1996), we present evidence on the role played by various smoothing mechanisms for specific economic shocks affecting Canadian provinces. Third, we assess whether smoothing mechanisms […]
Content Type(s): Staff research, Staff working papers Topic(s): Exchange rate regimes, Exchange rates JEL Code(s): F, F3, F33, F36, G, G1, G15

Optimal Currency Areas: A Review of the Recent Literature

Staff Working Paper 1999-16 Robert Lafrance, Pierre St-Amant
This paper surveys the recent literature on optimal currency areas (OCAs). Topics that are covered include theoretical developments in the context of general-equilibrium models and empirical work on shocks asymmetry and adjustment mechanisms. Issues relating to the endogeneity of OCA criteria, the role of exchange rate flexibility in promoting greater macroeconomic stability, and the links […]
Content Type(s): Staff research, Staff working papers Topic(s): Exchange rate regimes JEL Code(s): E, E4, E42, F, F3, F33
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