May 14, 1997
Bank of Canada Review - Spring 1997
Cover page
Japanese oban
Photography by James Zagon.
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1408
result(s)
May 13, 1997
Capacity constraints, price adjustment, and monetary policy
The short-run Phillips curve describes a positive short-run relationship between the level of economic activity and inflation. When the level of demand in the economy as a whole runs ahead of the level of output that the economy can supply in the short run, price pressures increase and inflation rises. This article reviews the origins of the short-run Phillips curve with particular emphasis on the long-standing idea that the shape of this curve may be non-linear, with inflation becoming more sensitive to changes in output when the cycle of economic activity is high than when it is low. This type of non-linearity in the short-run Phillips curve, which is typically motivated by the effects of capacity constraints that limit the ability of the economy to expand in the short run, has recently attracted renewed attention. The article surveys recent research that finds some evidence of this type of non-linearity in the Phillips curve in Canada and considers the potential implications for monetary policy.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Inflation and prices,
Monetary policy transmission,
Potential output
January 14, 1997
In 1996 inflation remained within the Bank’s target range but was subject to downward pressure. The low rate of inflation contributed to a major easing in monetary conditions, and interest rates reached their lowest level in 30 years.
Annual Report 1996
Content Type(s):
Publications,
Annual Report
January 11, 1997
Bank of Canada Review - Winter 1996-1997
Cover page
P.N. Breton, Canadian numismatist
The book, pamphlet, and advertising piece shown are part of the National Currency Collection, Bank of Canada.
Photography by James Zagon.
Content Type(s):
Publications,
Bank of Canada Review
December 11, 1996
The impact of exchange rate movements on consumer prices
In the first, mostly theoretical, part of this article, the author analyses the factors that affect the pass-through of exchange rate movements to consumer prices. In the second part, she studies the recent Canadian experience in this area, starting from 1992. The analysis in the first part of the article is used to investigate why the depreciation of the Canadian dollar by almost 20 per cent between 1992 and 1994 did not produce as much of an increase in the inflation rate as predicted by conventional estimates of the exchange rate pass-through. The author first explains this phenomenon using the factors described in the theoretical part of the article: demand conditions, the costs of adjusting prices, and expectations about the depreciation's duration. She then examines the role of more specific factors, such as the abolition of customs duties on trade between Canada and the United States and the restructuring of the retail market. It is clear that the latter two factors helped neutralize the effect of the depreciation on prices.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Exchange rates,
Inflation and prices,
Monetary policy transmission
December 10, 1996
The maturity structure of household financial assets and liabilities
In this article, the author examines the maturity structure of the household sector's balance sheet and the degree of interest rate variability of household loans and financial assets. The bulk of households' interest-bearing assets and financial liabilities consists of medium- and long-term, fixed-rate instruments. The pattern of personal consumption is therefore influenced more by the wealth effects of interest rate changes than by their income effects, and the full impact of a permnent shift in interest rates on consumption will become apparent only after a lag.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Sectoral balance sheet
December 9, 1996
The Canadian market for zero-coupon bonds
A conventional bond is a debt instrument consisting of a series of periodic coupon payments plus the repayment of the principal at maturity. As the name suggests, a zero-coupon bond has no coupon payments. It has only a single payment consisting of the repayment of the principal at maturity. The zero-coupon bond is sold at a discount and then redeemed for its face value at maturity. The return to the investor is the difference between the face value of the bond and its discounted purchase price. In this article, the author examines the investment characteristics of zero-coupon bonds. In particular, a type of zero-coupon bond known as a strip bond is discussed. A strip bond is created by stripping coupon payments from conventional bonds. The strip bond market in Canada has grown substantially since the late 1980s and is now an integral part of Canadian fixed-income markets. As well, the opportunity to trade in the strip bond market improves the liquidity and efficiency of Canadian fixed-income markets, thus helping to reduce the overall cost of borrowing to the government.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Financial markets
November 20, 1996
This Report outlines recent developments in the Canadian economy that affect the rate of inflation and provides an account of the measures taken by the Bank of Canada to control inflation.
Monetary Policy Report – November 1996
Content Type(s):
Publications,
Monetary Policy Report
November 11, 1996
Productivity growth in the commercial service sector
For over three decades, measured productivity growth in the commercial service sector has consistently lagged behind that of the goods-producing sector. At the same time, the service sector has greatly expanded its share of output and employment. Some commentators have suggested that this trend will reduce growth in total economy-wide productivity. In this article, the author reviews recent trends in productivity growth in services and the main factors affecting it. She concludes that services will likely contribute to increases in future productivity growth. There is a great diversity of experience within the service sector. While productivity is falling in some industries, factors such as technological change, deregulation, and increased competition have helped to increase it in others. Moreover, much of the growth in commercial service output is occurring in those industries with relatively high productivity growth. Difficulties in measuring output for some service activities may also be resulting in underestimation of output and productivity growth. To the extent that services are used as intermediate inputs in the production of goods, underestimating productivity growth in the service industry would cause an offsetting overestimation of productivity growth in goods-producing industries.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Productivity
November 11, 1996
Bank of Canada Review - Autumn 1996
Cover page
1804 Bank of England dollar
This piece is part of the National Currency Collection, Bank of Canada.
Photography by James Zagon.
Content Type(s):
Publications,
Bank of Canada Review