F4 - Macroeconomic Aspects of International Trade and Finance

• ToTEM II: An Updated Version of the Bank of Canada’s Quarterly Projection Model

  Technical Report No. 100 José Dorich, Michael K. Johnston, Rhys R. Mendes, Stephen Murchison, Yang Zhang

  This report provides a detailed technical description of an updated version of the Terms-of-Trade Economic Model (ToTEM II), which replaced ToTEM (Murchison and Rennison 2006) in June 2011 as the Bank of Canada’s quarterly projection model for Canada.

  Content Type(s): Staff research, Technical reports Topic(s): Business fluctuations and cycles, Economic models JEL Code(s): E, E1, E17, E2, E20, E3, E30, E4, E40, E5, E50, F, F4, F41

• The Safety of Government Debt

  Staff Working Paper 2013-34 Kartik Anand, Prasanna Gai

  We examine the safety of government bonds in the presence of Knightian uncertainty amongst financial market participants. In our model, the information insensitivity of government bonds is driven by strategic complementarities across counterparties and the structure of trading relationships.

  Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Financial stability, International financial markets JEL Code(s): D, D8, D81, E, E4, E44, F, F0, F02, F4, F41, G, G1, G15

• Endogenous Trade Participation with Incomplete Exchange Rate Pass-Through

  Staff Working Paper 2013-30 Yuko Imura

  This paper investigates the implications of endogenous trade participation for international business cycles, trade flow dynamics and exchange rate pass-through when price adjustments are staggered across firms.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Exchange rates, International topics JEL Code(s): F, F1, F12, F4, F44

• China’s Emergence in the World Economy and Business Cycles in Latin America

  Staff Working Paper 2012-32 Ambrogio Cesa-Bianchi, M. Hashem Pesaran, Alessandro Rebucci, TengTeng Xu

  The international business cycle is very important for Latin America’s economic performance as the recent global crisis vividly illustrated. This paper investigates how changes in trade linkages between China, Latin America, and the rest of the world have altered the transmission mechanism of international business cycles to Latin America.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, Econometric and statistical methods, International topics, Recent economic and financial developments, Regional economic developments JEL Code(s): C, C3, C32, E, E3, E32, F, F4, F44, O, O5, O54

• The Evolution of Canada’s Global Export Market Share

  Staff Working Paper 2012-31 Daniel de Munnik, Jocelyn Jacob, Wesley Sze

  Following gains during the 1990s, Canada’s global market share of goods exports has declined markedly in recent years. In this regard, the constant market share analysis framework is used to decompose changes in Canada’s global market share into competitiveness and structural effects over the 1990‐2010 period, as well as to draw some comparisons to a number of other countries.

  Content Type(s): Staff research, Staff working papers Topic(s): Balance of payments and components, Exchange rates, International topics JEL Code(s): F, F1, F10, F14, F4, F43

• The Sensitivity of Producer Prices to Exchange Rates: Insights from Micro Data

  Staff Working Paper 2012-20 Shutao Cao, Wei Dong, Ben Tomlin

  This paper studies the sensitivity of Canadian producer prices to the Canada-U.S. exchange rate. Using a unique product-level price data set, we estimate and analyze the impact of movements in the exchange rate on both domestic and export producer prices.

  Content Type(s): Staff research, Staff working papers Topic(s): Exchange rates, Inflation and prices, Market structure and pricing JEL Code(s): E, E3, E30, F, F3, F31, F4, F41, L, L1, L11

• International Business Cycles and Financial Frictions

  Staff Working Paper 2012-19 Wen Yao

  This paper builds a two-country DSGE model to study the quantitative impact of financial frictions on business cycle co-movements when investors have foreign asset exposure. The investor in each country holds capital in both countries and faces a leverage constraint on her debt.

  Content Type(s): Staff research, Staff working papers Topic(s): Business fluctuations and cycles, International financial markets, International topics JEL Code(s): E, E3, E30, F, F4, F42, F44

• Commodities and Monetary Policy: Implications for Inflation and Price Level Targeting

  Staff Working Paper 2012-16 Donald Coletti, René Lalonde, Paul Masson, Dirk Muir, Stephen Snudden

  We examine the relative ability of simple inflation targeting (IT) and price level targeting (PLT) monetary policy rules to minimize both inflation variability and business cycle fluctuations in Canada for shocks that have important consequences for global commodity prices.

  Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Inflation and prices, International topics, Monetary policy framework JEL Code(s): E, E1, E17, E3, E31, E37, E5, E52, F, F4, F41, Q, Q4, Q43
• May 17, 2012

  On the Adjustment of the Global Economy

  Bank of Canada Review - Spring 2012 Carlos De Resende, Claudia Godbout, René Lalonde, Eric Morin, Nikita Perevalov

  This article discusses three scenarios for the adjustment of the global economy. In a “baseline” scenario—which encompasses fiscal consolidation in major advanced economies, growth-friendly structural reforms in Europe and Japan, and greater exchange rate flexibility and reforms in the emerging-market economies of Asia to induce rotation of demand away from net exports—global current account imbalances […]

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Balance of payments and components, Exchange rates, Fiscal policy, International topics, Recent economic and financial developments JEL Code(s): F, F3, F32, F37, F4, F42

• Exchange Rates and Individual Good’s Price Misalignment: Some Preliminary Evidence of Long-Horizon Predictability

  Staff Discussion Paper 2011-8 Wei Dong, Deokwoo Nam

  When prices are sticky, movements in the nominal exchange rate have a direct impact on international relative prices. A relative price misalignment would trigger an adjustment in consumption and employment, and may help to predict future movements in the exchange rate.

  Content Type(s): Staff research, Staff discussion papers Topic(s): Exchange rates, International topics JEL Code(s): F, F3, F31, F4, F47