Bank of Canada Review - Summer 2001

August 17, 2001
Share this page on Facebook
Share this page on X
Share this page on X
Share this page on LinkedIn
Share this page on LinkedIn Share this page by email
BoC Review - Summer 2001

Cover page

Trade Silver

The objects featured on the cover range in size from 1 to 2.5 inches in width. They form part of the National Currency Collection, Bank of Canada.

Photography by James Zagon.
Content Type(s): Publications, Bank of Canada Review
August 17, 2001

The Changing Effects of Energy-Price Shocks on Economic Activity and Inflation

Bank of Canada Review - Summer 2001 Gerald Stuber
In this article the author examines the effects that major changes in energy prices in recent years have had on inflation and on the pace of economic expansion. These are then compared with the effects of the oil-price shocks that occurred in the 1970s and early 1980s. Changes in the intensity of energy use are examined, as well as developments in Canada's merchandise trade surplus in energy commodities and products. The author also considers the effects that a monetary policy anchored to low and stable inflation could have on price-setting behaviour and thus on the pass-through of higher energy costs to core inflation in Canada and in other industrial countries.
Content Type(s): Publications, Bank of Canada Review articles Topic(s): Business fluctuations and cycles
August 16, 2001

Innovation and Competition in Canadian Equity Markets

Bank of Canada Review - Summer 2001 Serge Boisvert, Charles Gaa
Innovations in communications and information technology and the related globalization of financial markets have created the potential for important changes to the structure of Canadian equity markets. Established marketplaces can now compete more effectively on an inter-regional and international basis. At the same time, reduced costs have lowered the barriers to entry faced by new competitors known as alternative trading systems (ATSs). In response to this heightened competition, established Canadian stock exchanges have taken measures to improve market quality. While regulators see innovation as positive for the development of Canadian markets, there is some concern that market liquidity may be fragmented in the short run. The Canadian Securities Administrators have proposed a framework that attempts to address this issue and that would allow ATSs to compete with traditional exchanges for the first time. The authors provide an overview of the Canadian equity market and its structure, focusing on these recent developments.
Content Type(s): Publications, Bank of Canada Review articles Topic(s): Financial markets
August 15, 2001

Analyzing the Monetary Aggregates

Bank of Canada Review - Summer 2001 Dinah Maclean
In recent years, the Bank has put renewed emphasis on analyzing monetary variables and on developing models that incorporate money as an active part of the transmission mechanism. In this article, Dinah Maclean describes how the monetary aggregates are used in the formulation of monetary policy analysis at the Bank, outlining the key tools and models used. The most important money-based model currently in use is the M1-VECM. In this model, deviations in the money supply from the long-term demand for money cause changes in inflation. The author briefly describes the "active-money" paradigm underlying this model and explains the key equations within it. Other simpler empirical models are also outlined, including single-equation indicator models for output based on the narrow aggregates, a neural network, and a model based on the broader aggregate M2++. A detailed technical annex provides details on model equations and coefficient values.
Content Type(s): Publications, Bank of Canada Review articles Topic(s): Monetary aggregates