Publications

• December 8, 2005

  Towards a Made-in-Canada Monetary Policy: Closing the Circle

  Bank of Canada Review - Winter 2005-2006 John Chant

  When the Bank of Canada was first established in 1935, it had two very different models to choose from—the Bank of England and the U.S. Federal Reserve—in terms of the instruments that it might use for implementing monetary policy. Although some aspects of the Bank's early monetary policy practices, including the role of discount facilities and moral suasion, reflect the British example, other important differences shaped a distinctly Canadian approach. Chant describes what he argues are distinctively Canadian innovations: the Bank's favoured means of managing chartered bank liquidity through transfers of government deposits, the adoption of lagged reserve requirements, and the two periods in which it decided to float the Bank Rate. He also describes the series of bold initiatives that were undertaken in the 1990s with regard to simplifying clearing and settlement procedures, reducing reserve requirements, and setting the Bank's target for the overnight rate. Chant suggests that these changes have improved market efficiency, reduced risk and uncertainty, and strengthened the Bank's influence over its short-term operating target.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Monetary policy implementation
• December 6, 2005

  The Bank of Canada: An Illustrated History

  

  This volume features interesting images and anecdotes about Canada's central bank and its place in Canadian society from 1935 until the present.

  Content Type(s): Publications, Books and monographs, Souvenir books
• December 2, 2005

  From Flapper to Bluestocking: What Happened to the Young Woman of Wellington Street?

  Bank of Canada Review - Winter 2005-2006 John F. Helliwell

  Helliwell traces the changes that have occurred at the Bank of Canada since the early 1960s, when he first began a long and extensive relationship with the institution and its staff. He begins with his work on the Royal Commission on Banking and Finance (the Porter Commission) and continues over the next 40 years, giving particular focus to the Bank's analytic and research activities. Although he is careful to note the benefits of alternative analytical and information-gathering techniques, such as the extensive mail and direct interview survey that he and his colleagues conducted as part of the Royal Commission, Helliwell devotes most of his attention to the Bank's econometric modelling efforts, starting with RDX1 and RDX2 in the late 1960s and early 1970s. He cites some of the internal, as well as external, obstacles that had to be overcome as the Bank's modelling efforts advanced, and how shifting trends in the economics profession have sometimes posed a challenge. Helliwell concludes that these developments helped the Bank to come of age and take its place in the front ranks of the world's evidence-based policy-research institutions.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Central bank research, Economic models
• October 25, 2005

  Exports, Imports, and the Appreciation of the Canadian Dollar

  Bank of Canada Review - Autumn 2005 Richard Dion, Michel Laurence, Yi Zheng

  An objective assessment of the effects of the appreciation of the Canadian dollar in 2003 and 2004 on exports and imports requires a detailed review of the numerous other factors which may have been at play. Dion, Laurence, and Zheng discuss the influences that have affected Canada's international trade over the past two years, including exchange rate movements, global and sector-specific shocks, constraints on the domestic supply of a few products, and competition from emerging economies, most notably, China. The analysis is complemented with econometric models developed at the Bank which provide statistically valid estimates of the contribution of the Canadian-dollar appreciation to the recent developments in exports and imports.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Balance of payments and components, Exchange rates, International topics
• October 25, 2005

  Bank of Canada Review - Autumn 2005

  

  Cover page

  Ready References

  The book is part of the National Currency Collection, Bank of Canada.
  Photography by Gord Carter, Ottawa.

  Content Type(s): Publications, Bank of Canada Review
• October 22, 2005

  How the Appreciation of the Canadian Dollar Has Affected Canadian Firms: Evidence from the Bank of Canada Business Outlook Survey

  Bank of Canada Review - Autumn 2005 Jean Mair

  To track how firms were affected by the appreciation of the Canadian dollar in 2003 and 2004 and the steps they took in response, the Bank included supplementary questions in the quarterly Business Outlook Survey conducted by its regional offices. About half of the firms surveyed reported being adversely affected, one-quarter experienced a favourable impact, and the remainder reported no effect. Jean Mair classifies and summarizes the firms' responses, identifying the sectors that were most and least affected. Causes of the impacts are identified, as well as the actions firms took as a result of the appreciation. The article looks at these actions over time to see what they tell us about firms' adjustment process.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Balance of payments and components, Exchange rates, Recent economic and financial developments
• October 20, 2005

  Monetary Policy Report – October 2005

  

  The global economy has continued to grow at a robust pace since the July Monetary Policy Report Update.

  Content Type(s): Publications, Monetary Policy Report
• October 18, 2005

  What Drives Movements in Exchange Rates?

  Bank of Canada Review - Autumn 2005 Jeannine Bailliu, Michael R. King

  Understanding what causes the exchange rate to move has been on ongoing challenge for economists. Despite extensive research, traditional macro models of exchange rate determination—with the exception of the Bank of Canada's exchange rate equation—have typically not fared well, motivating economists to explore new ways to model exchange rate movements that incorporate more complex and realistic settings. Within the context of the sharp appreciation of the Canadian dollar in 2003 and 2004, Bailliu and King review the macroeconomic models of exchange rates, as well as the micro-structure studies that highlight the importance of trading mechanisms, information asymmetry, and investor heterogeneity for explaining short-term dynamics in exchange rates. In addition to summarizing the current state of knowledge, they highlight recent advances and identify promising alternative approaches.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Economic models, Exchange rates, Financial markets
• October 7, 2005

  Business Outlook Survey - Autumn 2005

  Firms overall remain positive about the economic outlook.

  Content Type(s): Publications, Business Outlook Survey
• October 5, 2005

  The Exchange Rate and Canadian Inflation Targeting

  Bank of Canada Review - Autumn 2005 Christopher Ragan

  An essential element of the Bank of Canada's inflation-targeting framework is a floating exchange rate that is free to adjust in response to shocks that affect the Canadian and world economies. This floating rate plays an important role in the transmission mechanism for monetary policy. A practical question is how the Bank of Canada incorporates currency movements into the monetary policy decision-making process. Only after determining the cause and persistence of exchange rate change, and its likely net effect on aggregate demand, can the Bank decide on the appropriate policy response to keep inflation low, stable, and predictable. Ragan reviews the need to target inflation and the transmission mechanism for monetary policy, including the role of the exchange rate, before describing two types of exchange rate movements and their implications for monetary policy.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Exchange rates, Inflation targets, Monetary policy implementation