Publications

• November 11, 2008

  The Role of Dealers in Providing Interday Liquidity in the Canadian-Dollar Market

  Bank of Canada Review - Winter 2008-2009 Chris D'Souza

  Access to information about the future direction of the exchange rate can be extremely valuable in the foreign exchange market. Evidence presented in this article suggests that Canadian dealers are more likely to provide interday liquidity to foreign, rather than Canadian, financial customers, since foreign financial flows can be more informative about future movements in the exchange rate. The author reveals a statistical relationship between the supply of liquidity provided by non-financial firms and that provided by dealing institutions across time, and across markets, and suggests that the relationship between the positions of commercial clients and market-makers, and the role played by dealers in interday liquidity provision, has been understated in the market microstructure literature.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Exchange rates, Financial institutions, Financial markets, Market structure and pricing
• November 11, 2008

  Merchants' Costs of Accepting Means of Payment: Is Cash the Least Costly?

  Bank of Canada Review - Winter 2008-2009 Carlos Arango, Varya Taylor

  In a competitive sales environment, merchants are compelled to offer consumers the option of paying for goods and services using a variety of payment methods, including cash, debit card, or credit card. Each method entails different costs and benefits to merchants. To better understand the costs of accepting retail payments, the Bank of Canada surveyed over 500 Canadian merchants and found that most consider cash the least costly. This article investigated this perception by calculating the variable costs per transaction of accepting different means of payment. The findings are that costs for each payment method vary by merchant and transaction value, with debit cards the least costly payment for a broad cross-section of merchants.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Bank notes
• November 11, 2008

  The Market Impact of Forward-Looking Policy Statements: Transparency vs. Predictability

  Bank of Canada Review - Winter 2008-2009 Christine Fay, Toni Gravelle

  Central banks continuously strive to improve how they communicate to financial markets and the public in order to increase transparency. For this reason, many central banks have begun to include guidance on the policy rate in the form of forward-looking statements in their communications. This article examines the debate over the usefulness of providing such statements from both theoretical and empirical standpoints. The evidence presented here suggests that the use of forward-looking statements in Bank of Canada communications has made the Bank more predictable, but not necessarily more transparent.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Central bank research, Interest rates, Monetary policy transmission
• November 11, 2008

  Conference Summary: International Experience with the Conduct of Monetary Policy under Inflation Targeting

  Bank of Canada Review - Winter 2008-2009 Philipp Maier

  Central bankers from inflation-targeting and non-inflation-targeting countries around the world and several distinguished scholars assembled at the Bank of Canada in July 2008 to review the international experience in some detail. This article highlights topics covered in the special lectures and sessions, including how inflation targeting can manage external shocks, various ways in which monetary policy decisions are taken, and the issues of transparency and communications. It also reports on the discussion in the closing panel, which considered options for the future of inflation targeting.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Central bank research, Inflation targets, Monetary policy framework