Kevin Clinton - Latest
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November 14, 2000
Conference Summary: Money, Monetary Policy, and Transmission Mechanisms
This article summarizes the proceedings of a conference hosted by the Bank of Canada in November 1999. Three major themes emerged at the conference. The first concerned uncertainty about the transmission mechanism by which monetary policy affects output and inflation. The second concerned the potential usefulness of monetary aggregates in guiding the economy along a stable non-inflationary growth path. The third was the recent developments in dynamic monetary general-equilibrium models. The work presented suggests that a wide range of models is useful for understanding the various paths by which monetary policy actions might influence the economy. -
December 12, 1998
Conference summary: Information in financial asset prices
This article summarizes the proceedings of a conference hosted by the Bank of Canada in May 1998. This was the second Bank conference to focus directly on issues concerning financial markets. The topic for 1998—the extraction of information from the prices of financial assets—has been an area of extensive research by central banks worldwide because of its connection to monetary policy. The Bank wanted to encourage such work by Canadian researchers as well as solicit feedback on work conducted internally. It also wanted to broaden the understanding of the interplay in the markets between central banks and other participants. It therefore assembled a wide mix of researchers, central bankers, and market participants. The summary briefly outlines the papers presented as well as the wrap-up discussion. -
May 13, 1998
Canada-U.S. long-term interest differentials in the 1990s
Long-term Canada-U.S. interest spreads have changed remarkably during the 1990s. The unusually wide spreads of the first half of the decade have given way to an unprecedented run of negative yield differentials. In this article, the author examines the conceptual aspects of yields on international assets and their application to the Canada-U.S. situation. Prior to 1995, investors were unsure that, over the long run, inflation would meet the targets set by the government and the Bank. Policy credibility was undermined by large budget deficits and political uncertainty. In the second half of the decade, confidence was re-established as the fiscal positions of governments improved, long-run price stability became established, and political concerns about Quebec lessened. As long as these fundamentals hold, long-term rates should remain relatively low, even when short-term rates rise. -
Constraints on the Conduct of Canadian Monetary Policy in the 1990s: Dealing with Uncertainty in Financial Markets
Canada's economic performance in the first half of the 1990s was adversely affected by high premiums in interest rates that were brought on by political and economic uncertainties. -
Implementation of Monetary Policy in a Regime with Zero Reserve Requirements
Monetary policy can be implemented effectively without reserve requirements as long as cost incentives ensure a predictable demand for settlement balances. A central bank can then achieve the level of short-term interest rates that it desires, using market-oriented instruments only. -
May 17, 1996
The Transmission of Monetary Policy
Text of major 1995 lecture by Bank Governor Gordon Thiessen, plus articles from Bank of Canada Review and other sources
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May 9, 1995
Interpreting recent changes in monetary aggregates
In 1994, broad monetary aggregates such as M2+ grew at an unusually slow rate, indicating a continuation of low inflation. Narrow money, M1, ballooned early in the year, partly for technical reasons. However, its overall deceleration for the year as a whole would be consistent with lower output growth in the first half of 1995 than was seen the year before. During the first half of 1994, there was a continued shift by investors from deposits into equity, bond and mortgage mutual funds. In the second half of the year, following a rise in interest rates and a fall in the yields posted by mutual funds, there was a movement back into M2+. In this annual review of the monetary aggregates, the author discusses the reasons for these shifts and their implications for M2+. -
December 9, 1994
The term structure of interest rates as a leading indicator of economic activity: A technical note
The spread between long-term and short-term interest rates has proven to be an excellent predictor of changes of economic activity in Canada. As a general rule, when long-term interest rates have been much above short-term rates, strong increases in output have followed within about a year; however, whenever the yield curve has been inverted for any extended period of time, a recession has followed. Similar findings exist for other countries, including the United States. But although Canadian and U.S. interest rates generally move quite closely together, the Canadian yield curve has been distinctly better at predicting future Canadian output. The explanation given for this result is that the term spread has reflected both current monetary conditions, which affect short-term interest rates, and expected real returns on investment and expectations of inflation, which are the main determinants of long-term rates. This article is mainly a summary of econometric work done at the Bank. It also touches on some of the extensive recent literature in this area. -
From Monetary Policy Instruments to Administered Interest Rates: The Transmission Mechanism in Canada
The authors investigate interest-rate aspects of the transmission mechanism of monetary policy instruments in Canada, focussing on the stability of the relationships between some key interest rates and the instruments of monetary policy. To determine what shifts may have occurred in recent years, they describe movements in rate differentials, apply cointegration tests and estimate error-correction […]