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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.

The LVTS is an electronic network for sending and receiving large-value payments. It is expected to become operational in the first half of 1999. Major chartered banks and other large deposit-taking institutions will provide access to the system for their clients in the financial, corporate and government sectors. Canada’s LVTS exceeds world standards for risk control in large-value systems. The author explains how this is achieved through the netting, bilateral and multilateral credit limits, collateral, and loss-sharing procedures used in the event of a default, and, as a last resort, a guarantee by the Bank of Canada. The LVTS gives participating institutions certainty of settlement for their LVTS positions every day, even if one or more participants default. This greatly reduces systemic risk in the financial system. Moreover, the LVTS supports finality of payment; that is, it makes funds unconditionally and irrevocably available to the receiver. Finality is highly desirable when the amount of the payment is substantial, or when exact timing is critical. Since the LVTS will carry the great majority of the value of all payments in Canada, it should be considered the core of the national payments system.

The author summarizes the objectives and key elements of the framework that the Bank will use to implement monetary policy under the new payments system. The article includes a comparison of the key features of the pre-LVTS framework with that to be used in the LVTS environment. It also features a glossary of terms with respect to the Bank's monetary policy operations.

On behalf of the Minister of Finance, the Bank of Canada announced today the operational framework for the previously announced pilot bond buyback program.

Mr. Chairman, I am pleased to appear before you today as part of your study of the Task Force Report on the Future of the Canadian Financial Services Sector. Perhaps it might be helpful if I were to start by clarifying the Bank of Canada’s role in this area. The Bank has no formal responsibility […]

The Bank of Canada today lowered its Bank Rate by ¼ of one percentage point to 5½ per cent.

As an economist who worked as a banker for most of his career, Douglas Gibson brought an interesting perspective to public policy issues, to the relationship between government and business, and to the contribution of outside economists to government policies.

Summary results of a survey of Canadian foreign exchange and derivatives markets are now available. The survey was conducted by the Bank of Canada in April 1998 and covered activity in the foreign exchange and derivatives markets. Similar surveys were undertaken by about 40 other countries during the same month, and the central banks of many of those countries are also releasing their results today.

The Bank of Canada today lowered its Bank Rate by ¼ of one percentage point to 5¾ per cent.

On behalf of the Minister of Finance, the Bank of Canada announced today that "Revised rules pertaining to auctions of Government of Canada securities and the Bank of Canada's surveillance of the auction process," released 11 August 1998, will take effect on 14 October 1998.