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  • August 23, 2003

    Financial Developments in Canada: Past Trends and Future Challenges

    Bank of Canada Review - Summer 2003 Charles Freedman, Walter Engert
    Freedman and Engert focus on the changing pattern of lending and borrowing in Canada in the past thirty to forty years, including the types of financial instruments used and the relative roles of financial institutions and financial markets. They examine how borrowing mechanisms have changed over time and consider the challenges facing the Canadian financial sector, including whether our financial markets are in danger of disappearing because of the size and pre-eminence of U.S. financial markets. Some of the trends examined here include syndicated lending, securitization, and credit derivatives, a form of financial engineering that has become increasingly important in the last few years. They also study bond and equity markets to determine whether Canadian capital markets have been hollowed out or abandoned by Canadian firms and conclude that the data do not provide much support for that view.
    Content Type(s): Publications, Bank of Canada Review articles Topic(s): Financial institutions, Financial markets, Financial services, Recent economic and financial developments
  • August 23, 2003

    Bank of Canada Review - Summer 2003

    BoC Review - Summer 2003

    Cover page

    Canadian World War I War Bond

    The $100 10-year bond of the FirstWar Loan is slightly larger than a sheet of legal-sized paper. It forms part of the National Currency Collection, Bank of Canada.

    Photographed by Gord Carter, Ottawa.
    Content Type(s): Publications, Bank of Canada Review
  • August 22, 2003

    Measuring Interest Rate Expectations in Canada

    Bank of Canada Review - Summer 2003 Grahame Johnson
    Financial market expectations regarding future changes in the target for the overnight rate of interest are an important source of information for the Bank of Canada. Financial markets are the mechanism through which the policy rate affects other financial variables, such as longer-term interest rates, the exchange rate, and other asset prices. An accurate measure of their expectations can therefore help policy-makers assess the potential impact of contemplated changes. Johnson focuses on the expectations hypothesis, which measures expectations of future levels of the target overnight rate as implied by current money market yields. Although expectations can be derived from the current yield on any short-term fixed-income asset, some assets have proven to be more accurate predictors than others. The implementation of a policy of fixed-announcements dates has coincided with the increased predictive power of these short-term assets. As a result of this improvement, a relatively simple model of the yield curve can now provide an accurate measure of financial market expectations.
    Content Type(s): Publications, Bank of Canada Review articles Topic(s): Exchange rates, Financial markets, Interest rates
  • August 21, 2003

    Real Return Bond Funding Review

    The Real Return Bond (RRB) program was created in line with the Government's fundamental objective of raising stable, low-cost funding.
  • August 21, 2003

    Summer 2003 Consultation Document

    The purpose of these consultations is to obtain the views of market participants on issues relating to the design and operation of the government Real Return Bond (RRB) program.
  • August 21, 2003

    Dollarization in Canada: An Update

    Bank of Canada Review - Summer 2003 John Murray, James Powell, Louis-Robert Lafleur
    The authors describe a special survey of the payment and financial-reporting practices of Canadian firms conducted by the Bank of Canada's regional offices to determine if the U.S. dollar has started to displace the Canadian dollar as a preferred unit of account. A cross-section of firms was asked what currency (or currencies) they used: (i) for quoting sales to Canadian customers, (ii) for quoting prices to foreigners, (iii) for reporting their financial results, and (iv) for quoting salaries and wages. The survey results reported here extend some earlier results reported in a previous Review article by Murray and Powell. The data indicate that, despite the dominance of the U.S. dollar in world trade and as an international standard of value, use of the U.S. dollar in Canada is very limited. The vast majority of Canadian firms price their products and keep their financial statements in Canadian dollars, and very few workers in Canada have their salaries paid in a foreign currency. The Canadian dollar is still strongly preferred for most pricing and financial-reporting activities in Canada, and there is very little evidence of "dollarization."
    Content Type(s): Publications, Bank of Canada Review articles Topic(s): Exchange rate regimes

  • Forecasting and Analyzing World Commodity Prices

    Staff Working Paper 2003-24 René Lalonde, Zhenhua Zhu, Frédérick Demers
    The authors develop simple econometric models to analyze and forecast two components of the Bank of Canada commodity price index: the Bank of Canada non-energy (BCNE) commodity prices and the West Texas Intermediate crude oil price. They present different methodologies to identify transitory and permanent components of movements in these prices.
    Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods JEL Code(s): C, C5
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