Bank of Canada Review - Winter 2000-2001

January 16, 2001
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BoC Review - Winter 2000-2001

Cover page

Intaglio Master Plate—Bank of Canada, 1954 Series $5

The intaglio plate shown here is made of steel and measures approximately 8 1/4 x 4 3/4 inches. Together with the note, the engraver's chisel, and eyeglass, it is part of the National Currency Collection, Bank of Canada.

Photography by James Zagon.
Content Type(s): Publications, Bank of Canada Review
December 17, 2000

Dynamic General-Equilibrium Models and Why the Bank of Canada is Interested in Them

Bank of Canada Review - Winter 2000-2001 Kevin Moran
Dynamic general-equilibrium models (DGEMs) are being increasingly used in macroeconomic research. In this article, the author describes the main features of these models and outlines their contribution to economic research performed at the Bank of Canada. He notes that the basic principle of DGEMs is that the modelling of economic activity, even on a scale as large as the economy of a country, should start with a series of microeconomic problems (at the scale of individuals), which, once resolved, are aggregated to represent the macroeconomic reality described by the model.
Content Type(s): Publications, Bank of Canada Review articles Topic(s): Economic models
December 16, 2000

The Bank of Canada's Management of Foreign Currency Reserves

Bank of Canada Review - Winter 2000-2001 Jacobo De Leon
This article describes the Bank's management of the liquid foreign currency portion of the government's official reserves. It broadly outlines the operations of the Exchange Fund Account (EFA), the main account in which Canada's reserves are held. It then briefly reviews the evolution of the objectives and management of the EFA over the past 25 years, particularly in light of the changing level of reserves and developments in financial markets. The EFA is funded by Canada's foreign currency borrowings in capital markets. The article focuses on the comprehensive portfolio framework used to manage the Account, which matches assets and liabilities. Under this framework, funds are invested in assets that match, as closely as possible, the characteristics of foreign currency liabilities issued, helping to immunize the portfolio against currency and interest rate risks.
Content Type(s): Publications, Bank of Canada Review articles Topic(s): Financial markets, Interest rates
December 15, 2000

The Federal Government's Use of Interest Rate Swaps and Currency Swaps

Bank of Canada Review - Winter 2000-2001 John Kiff, Uri Ron, Shafiq K. Ebrahim
Interest rate swaps and currency swaps are contracts in which counterparties agree to exchange cash flows according to a pre-arranged formula over a period of time. Since 1985, the federal government has been using such swaps to manage its liabilities in a cost-effective and flexible manner. The authors outline the characteristics of swap agreements and the ways in which the government uses them. They show that the swap program has been cost-effective, estimating that past and projected savings exceed $500 million. The authors also discuss the methods that the government uses to monitor the counterparty credit risk associated with these transactions.
Content Type(s): Publications, Bank of Canada Review articles Topic(s): Interest rates