Bank of Canada Review - Winter 1997-1998

January 14, 1998
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BoC Review - Winter 1997-1998/Revue BdC - Hiver 1997-1998

Cover page

Mafeking siege note

This ten-shilling note measures 6 1/4 by 5 3/4 inches and forms part of the National Currency Collection, Bank of Canada.

Photography by James Zagon.
Content Type(s): Publications, Bank of Canada Review
December 14, 1997

Recent economic and financial developments

Bank of Canada Review - Winter 1997-1998
The Canadian economy expanded at an average rate of over 4 per cent through the second half of 1996 and the first three quarters of 1997. The expansion was supported by accommodative monetary conditions, substantial employment gains, low inflation, an improved fiscal postion, and strong U.S. demand. These factors will continue to underpin a scenario of sustained growth in output and employment in the period ahead. With the situation in Asia still evolving, it is difficult to be precise about the size of its overall impact on Canada. At the same time, there have been some positive developments including stronger-than-anticipated economic performance in the United States, Mexico, and Europe and declining longer-term interest rates in most industrial countries. The core rate of inflation slipped slightly below the 1 to 3 per cent target range in the closing months of 1997. With the unwinding of some of the special factors that contributed to the decline, trend inflation is expected to move back inside the range in coming months.
Content Type(s): Publications, Bank of Canada Review articles Topic(s): Recent economic and financial developments
December 13, 1997

The overnight market in Canada

Bank of Canada Review - Winter 1997-1998 Eugene Lundrigan, Sari Toll
The overnight market is an active forum where participants with a temporary surplus or shortage of funds can lend or borrow until the next business day. The level of interest rates in the overnight market has always been closely linked to the Bank of Canada's monetary policy operations. In this article, the authors describe the evolution of the market from its roots in the 1950s, the development of the Bank's monetary policy operations in the market, and how the market operates today. They also examine the outlook for the overnight market, particularly the implications of the new Large-Value Transfer System.
Content Type(s): Publications, Bank of Canada Review articles Topic(s): Monetary policy implementation
December 12, 1997

Potential output growth: Some long-term projections

Bank of Canada Review - Winter 1997-1998 John Kuszczak, Richard Dion
This article examines factors that have affected the growth of potential output since the 1950s and presents three possible scenarios for its growth in the future. The authors conclude that there will be a marked slowing in the future growth of potential output as a result of slow population growth and a reduction in labour force participation as the population ages.
Content Type(s): Publications, Bank of Canada Review articles Topic(s): Potential output
December 11, 1997

Price stability, inflation targets, and monetary policy: Conference summary

Bank of Canada Review - Winter 1997-1998 Tiff Macklem
This article summarizes the proceedings of a conference hosted by the Bank of Canada in May 1997. The first conference held by the Bank on this subject was in 1993, two years after the introduction of inflation targeting in Canada. The 1997 conference revisited many of the analytic issues related to price stability that had been examined at the first conference, while also considering several additional questions. This time, with the extension of inflation-control targets beyond 1998 under consideration, particular emphasis was placed on the role and design of those targets. The conference also featured a round-table discussion among practitioners of monetary policy in three inflation-targeting countries—New Zealand, Sweden, and the United Kingdom. Their remarks, which focussed on the experience with inflation targets, bring out very clearly the common challenges facing monetary policymakers in open economies.
Content Type(s): Publications, Bank of Canada Review articles Topic(s): Monetary policy framework