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  • May 11, 1998

    The use of forward rate agreements in Canada

    Bank of Canada Review - Spring 1998 Jean-Yves Paquette, David Stréliski
    In this article, the authors identify forward rate agreements, or FRAs, as short-term interest rate guarantee instruments negotiated by two parties, one of which is typically a bank. In outlining the main features of FRAs, the authors contrast them with BAX contracts (futures contracts on bankers' acceptances that are negotiated through the Montreal Exchange). The article then describes how market participants use FRAs to cover short-term interest rate risk. The final section deals with the way the Bank of Canada uses information from the FRA market as an indicator of interest rate expectations. Econometric models used to retrieve information from FRA rates, as well as the underlying assumptions, are discussed in an appendix.
    Content Type(s): Publications, Bank of Canada Review articles Topic(s): Financial markets, Monetary and financial indicators
  • January 29, 1998

    Annual Report 1997

    With inflation remaining low for the sixth consecutive year, the Canadian economy recorded a strong expansion of about 4 per cent through 1997.
    Content Type(s): Publications, Annual Report
  • December 14, 1997

    Recent economic and financial developments

    Bank of Canada Review - Winter 1997-1998
    The Canadian economy expanded at an average rate of over 4 per cent through the second half of 1996 and the first three quarters of 1997. The expansion was supported by accommodative monetary conditions, substantial employment gains, low inflation, an improved fiscal postion, and strong U.S. demand. These factors will continue to underpin a scenario of sustained growth in output and employment in the period ahead. With the situation in Asia still evolving, it is difficult to be precise about the size of its overall impact on Canada. At the same time, there have been some positive developments including stronger-than-anticipated economic performance in the United States, Mexico, and Europe and declining longer-term interest rates in most industrial countries. The core rate of inflation slipped slightly below the 1 to 3 per cent target range in the closing months of 1997. With the unwinding of some of the special factors that contributed to the decline, trend inflation is expected to move back inside the range in coming months.
    Content Type(s): Publications, Bank of Canada Review articles Topic(s): Recent economic and financial developments
  • December 13, 1997

    The overnight market in Canada

    Bank of Canada Review - Winter 1997-1998 Eugene Lundrigan, Sari Toll
    The overnight market is an active forum where participants with a temporary surplus or shortage of funds can lend or borrow until the next business day. The level of interest rates in the overnight market has always been closely linked to the Bank of Canada's monetary policy operations. In this article, the authors describe the evolution of the market from its roots in the 1950s, the development of the Bank's monetary policy operations in the market, and how the market operates today. They also examine the outlook for the overnight market, particularly the implications of the new Large-Value Transfer System.
    Content Type(s): Publications, Bank of Canada Review articles Topic(s): Monetary policy implementation
  • December 12, 1997

    Potential output growth: Some long-term projections

    Bank of Canada Review - Winter 1997-1998 John Kuszczak, Richard Dion
    This article examines factors that have affected the growth of potential output since the 1950s and presents three possible scenarios for its growth in the future. The authors conclude that there will be a marked slowing in the future growth of potential output as a result of slow population growth and a reduction in labour force participation as the population ages.
    Content Type(s): Publications, Bank of Canada Review articles Topic(s): Potential output
  • December 11, 1997

    Price stability, inflation targets, and monetary policy: Conference summary

    Bank of Canada Review - Winter 1997-1998 Tiff Macklem
    This article summarizes the proceedings of a conference hosted by the Bank of Canada in May 1997. The first conference held by the Bank on this subject was in 1993, two years after the introduction of inflation targeting in Canada. The 1997 conference revisited many of the analytic issues related to price stability that had been examined at the first conference, while also considering several additional questions. This time, with the extension of inflation-control targets beyond 1998 under consideration, particular emphasis was placed on the role and design of those targets. The conference also featured a round-table discussion among practitioners of monetary policy in three inflation-targeting countries—New Zealand, Sweden, and the United Kingdom. Their remarks, which focussed on the experience with inflation targets, bring out very clearly the common challenges facing monetary policymakers in open economies.
    Content Type(s): Publications, Bank of Canada Review articles Topic(s): Monetary policy framework
  • November 14, 1997

    European economic and monetary union: Background and implications

    Bank of Canada Review - Autumn 1997 Chantal Dupasquier, Jocelyn Jacob
    The European Union, which currently consists of 15 states, occupies an important place among the advanced economies. The final stage of the European economic and monetary union (EMU) is scheduled to begin in January 1999 with the adoption of a common currency called the "euro." A decision on which countries will participate in the euro area in 1999 will be made next spring based in part on the achievement of the economic criteria laid out in the Maastricht Treaty. In this article, the authors, after a brief discussion of the historical background, cast some light on the institutional aspects of the EMU, on the formulation and implementation of economic policy, as well as on the internal and external effects of EMU completion. For Canada, the direct implications of the shift to the euro appear to be relatively modest, at least in the short run.
    Content Type(s): Publications, Bank of Canada Review articles Topic(s): Exchange rates, International topics, Recent economic and financial developments
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