Staff research, Publications
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A Measure of Underlying Inflation in the United States
A monetary authority with the primary objective of price stability has to distinguish between temporary price shocks and persistent shocks to the rate of inflation. A measure of underlying inflation, therefore, has an important role to play as a guideline for monetary policy. -
Les marchés du travail régionaux : une comparaison entre le Canada et les États-Unis
The purpose of this study is to compare the behaviour of regional labour markets in Canada and the United States. The study shows that the degree of persistence of unemployment is significantly higher in the provinces of Canada than it is in the various American regions. -
August 14, 1997
The fiscal impact of privatization in Canada
Privatization—the transfer of activities from the public to the private sector—gained international prominence in the 1980s because of the need to reduce budget deficits and growing concerns about the efficiency of state-owned enterprises and government bureaucracies. This article examines privatization in Canada and its effect on governments' fiscal positions. Privatization has generally been less rapid and extensive in Canada than elsewhere, partly because of the comparatively moderate size of our public sector. Nevertheless, federal, provincial, and municipal governments have increasingly reduced their direct involvement in the Canadian economy by selling Crown corporations, contracting with private firms to deliver public services, and transferring the development of public infrastructure projects to the private sector. The fiscal impact of privatizing Crown corporations varies with such factors as the profitability of the enterprise, the size of the government's initial investment, and past write-downs. In general, when privatizations are part of a broader effort to improve public finances, they can contribute to fiscal consolidation by reducing budgetary requirements and debt levels. When services and infrastructure projects are privatized, it is expected that more efficient private sector management will reduce government expenditures. For example, a private consortium may be better able to manage the financial risks involved in building an infrastructure facility, such as cost overruns or the withdrawal of contractors, than the public sector. The key to raising efficiency and lowering costs, however, is competition, not privatization per se. Therefore, the cost savings arising from the privatization of services or public works depend crucially on the terms of the contract. Overall, when structured to improve economic efficiency, privatization is likely to enhance the economy's performance, thereby producing long-term economic and budgetary gains. -
August 14, 1997
Bank of Canada Review - Summer 1997
Cover page
Samuel Zimmerman and the Zimmerman Bank
This note is part of the National Currency Collection, Bank of Canada.
Photography by James Zagon.
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August 13, 1997
The new bank note distribution system
In this article, the author outlines the recent changes made to the way Canada's bank notes are distributed. The new system allows financial institutions to exchange notes directly with one another at designated points across the country, rather than through Bank of Canada agencies, as was previously the case. The institutions communicate with the Bank of Canada through a computerized inventory-management system. Two Bank of Canada operations centres monitor note quality and supply new notes to the financial institutions. While the Bank continues to maintain firm control over the distribution of Canada's bank notes, the management of information rather than physical notes will improve efficiency and allow significant cost savings to the Bank of Canada and to the government. -
Measurement of the Output Gap: A Discussion of Recent Research at the Bank of Canada
In this paper, we discuss some methodologies for estimating potential output and the output gap that have recently been studied at the Bank of Canada. The assumptions and econometric techniques used by the different methodologies are discussed in turn, and applications to Canadian data are presented. -
Canadian Short-Term Interest Rates and the BAX Futures Market: Analysis of the Impact of Volatility on Hedging Activity and the Correlation of Returns between Markets
This paper analyses how Canadian financial firms manage short-term interest rate risk through the use of BAX futures contracts. The results show that the most effective hedging strategy is, on average, a static strategy based on linear regression that assumes constant variances, even though dynamic models allowing for time-varying variances are found to have superior explanatory power. -
Canadian Policy Analysis Model: CPAM
This paper documents the structure and properties of the Canadian Policy Analysis Model (CPAM). CPAM is designed to provide a reasonably complete representation of the Canadian macro economy. -
The Effects of Budget Rules on Fiscal Performance and Macroeconomic Stabilization
Budget rules can be defined as legislated or constitutional constraints on government deficits, taxes, expenditures, or debt. This paper reviews the budget rules recently legislated in six of Canada's provinces and both of its territories, as well as budget rules in other OECD countries.
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