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June 16, 2006
Global Imbalances—Just How Dangerous?
The combination of rising current account surpluses in Asia and a growing current account deficit in the United States has raised concerns that the resulting imbalances pose a threat to the world economy, especially if they are reversed in a disorderly manner. Some experts believe that normal market forces will resolve these imbalances over time; others argue that policy-makers should facilitate the adjustment with policies that curb domestic demand in deficit countries and stimulate it in surplus countries. Little and Lafrance provide a guide to the major issues and controversies involved in the debate.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Balance of payments and components,
Exchange rates,
International topics
June 11, 2006
Evaluating Measures of Core Inflation
Since the Bank of Canada adopted inflation targeting in 1991, it has focused on a measure of core inflation as a shorter-term guide for monetary policy. When the targets were renewed in 2001, the Bank adopted CPIX as its measure of core inflation because of the advantages it offered. Leflèche and Armour review the experience with CPIX and whether the criteria used to select it in 2001 still favour the measure today. They describe the various measures of core inflation monitored by the Bank and evaluate them on the basis of the volatility of the components, the volatility of the core measures themselves, absence of bias relative to total CPI, predictive power, and certain practical criteria, including timeliness and credibility. They conclude that CPIX still satisfies all the empirical and practical criteria.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Inflation and prices,
Inflation targets,
Monetary policy framework
June 2, 2006
Another Look at the Inflation-Target Horizon
The conduct of monetary policy within an inflation-targeting framework requires the establishment of an inflation-target horizon, which is the average time it takes inflation to return to the target. Policy-makers have an interest in communicating this horizon, since it is likely to help anchor inflation expectations. This article focuses on the determination of the appropriate policy horizon by reporting on two recent Bank of Canada studies. The evidence suggests that the current target horizon of six to eight quarters remains appropriate. It is important to note that the duration of the optimal inflation-target horizon varies widely, depending on the combination of shocks to the economy. In rare cases when the financial accelerator is triggered by a persistent shock, such as an asset-price bubble, it may be appropriate to take a longer view of the inflation-target horizon.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Inflation targets,
Monetary policy framework,
Monetary policy transmission
April 27, 2006
The Canadian economy continues to grow at a solid pace, consistent with the Bank’s outlook in the January Monetary Policy Report Update.
Monetary Policy Report – April 2006
Content Type(s):
Publications,
Monetary Policy Report
April 17, 2006
Businesses are positive about the economic outlook. Hiring and investment intentions are strong, while future sales are expected to increase at about the same pace as in the past 12 months.
Business Outlook Survey - Spring 2006
Supplemental questions on the appreciation of the Canadian dollar - Spring 2006
Content Type(s):
Publications,
Business Outlook Survey
April 16, 2006
Bank of Canada Review - Spring 2006
Cover page
Depression Scrip
The examples of Depression scrip illustrated here are part of the National Currency Collection of the Bank of Canada.
Content Type(s):
Publications,
Bank of Canada Review
April 15, 2006
Issues in Inflation Targeting: A Summary of the Bank of Canada Conference Held 28-29 April 2005
The Bank of Canada's 2005 conference focused on two critical issues: price-level targets versus inflation targets, and the appropriate level of inflation. Session topics included new methodological approaches to examining the validity of the New Keynesian Phillips curve for Canada; the monetary policy implications of border effects and the financial-accelerator model; the zero lower bound on nominal interest rates; and inflation and welfare in general-equilibrium macroeconomic models. A panel of invited speakers discussed the issues of each session, and two distinguished speakers gave their perspectives on inflation.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Inflation and prices,
Inflation targets,
Monetary policy framework
April 14, 2006
Trends in Retail Payments and Insights from Public Survey Results
While the volume and value of bank notes have continued to increase, the use of cash as a payment method has been affected by the growing use of electronic alternatives. Taylor reports on a 2004 Bank of Canada survey of consumers' payment habits and their perceptions of cash and its alternatives, including their confidence in the security of bank notes. Analysis of the survey results shows that numerous factors affect the demand for bank notes, including income, age, education, gender, the use of debit and credit cards, and the perceived convenience of cash. Taylor also includes a report on the construction of a bank note confidence index that will serve as a benchmark for future surveys.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Bank notes
April 12, 2006
The Evolution of the Government of Canada's Debt Distribution Framework
This overview includes a brief history highlighting the government's use of the primary and secondary markets to develop a framework for distributing its debt securities to financial market intermediaries and end investors. The framework is also intended to meet the government's debt-strategy objectives of raising stable, low-cost funding and maintaining a well-functioning debt market. Pellerin reviews the government's adoption of a new framework in 1998 as well as the 2005 modifications aimed at attracting continued broad and competitive participation in government auctions.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Debt management,
Financial markets