International financial markets
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June 8, 2017
Canada’s International Investment Position: Benefits and Potential Vulnerabilities
While greater global financial integration is beneficial, the authors discuss how foreign capital inflows can also facilitate the buildup of domestic vulnerabilities and potentially lead to destabilizing reversals. Canada’s current international investment position is typical of advanced economies and will likely continue to act as an economic stabilizer. However, the growth and composition of Canada’s international investment position warrant continued monitoring. -
Assessing the Predictive Ability of Sovereign Default Risk on Exchange Rate Returns
Increased sovereign credit risk is often associated with sharp currency movements. Therefore, expectations of the probability of a sovereign default event can convey important information regarding future movements of exchange rates. -
Accounting for Real Exchange Rates Using Micro‐Data
The classical dichotomy predicts that all of the time-series variance in the aggregate real exchange rate is accounted for by non-traded goods in the consumer price index (CPI) basket because traded goods obey the Law of One Price. In stark contrast, Engel (1999) claimed the opposite: that traded goods accounted for all of the variance. -
March 28, 2017
Canada at 150: It Takes a World to Raise a Nation
Governor Stephen S. Poloz shows how Canada’s economic progress has been driven by its historic preference for openness to immigration, investment and trade. -
March 2, 2017
Thermometer Rising—Climate Change and Canada’s Economic Future
Deputy Governor Tim Lane discusses the implications of climate change—and actions to address it—for Canada’s economy and financial system. -
Expropriation Risk and FDI in Developing Countries: Does Return of Capital Dominate Return on Capital?
Previously reported effects of institutional quality and political risks on foreign direct investment (FDI) are mixed and, therefore, difficult to interpret. We present empirical evidence suggesting a relatively clear, statistically robust, and intuitive characterization. -
Capital Flows to Developing Countries: Is There an Allocation Puzzle?
Foreign direct investment inflows are positively related to growth across developing countries—but so are savings in excess of investment. I develop an explanation for this well-established puzzle by focusing on the limited availability of consumer credit in developing countries together with general equilibrium effects. -
November 16, 2016
Follow the Money: A Canadian Perspective on Financial Globalization
Deputy Governor Timothy Lane discusses the benefits and challenges of international capital mobility. -
The Global Financial Cycle, Monetary Policies and Macroprudential Regulations in Small, Open Economies
This paper analyzes the implications of the global financial cycle for conventional and unconventional monetary policies and macroprudential policy in small, open economies such as Canada. The paper starts by summarizing recent work on financial cycles and their growing correlation across borders.