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2380
result(s)
Oil-Price Shocks and Retail Energy Prices in Canada
Staff Working Paper 2002-38
Marwan Chacra
The effects of global energy-price shocks on retail energy prices in Canada are examined. More specifically, the author looks at the response of the consumer price indexes for gasoline, heating oil, natural gas, and electricity in Canada to movements in world crude oil prices.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Econometric and statistical methods,
Inflation and prices,
Market structure and pricing
JEL Code(s):
C,
C2,
C22,
C5,
C51,
C53,
Q,
Q4,
Q40
The Performance and Robustness of Simple Monetary Policy Rules in Models of the Canadian Economy
Technical Report No. 92
Denise Côté,
John Kuszczak,
Jean-Paul Lam,
Ying Liu,
Pierre St-Amant
In this report, we evaluate several simple monetary policy rules in twelve private and public sector models of the Canadian economy. Our results indicate that none of the simple policy rules we examined is robust to model uncertainty, in that no single rule performs well in all models.
Content Type(s):
Staff research,
Technical reports
Topic(s):
Monetary policy and uncertainty
JEL Code(s):
E,
E5,
E52,
E58
November 21, 2002
Is Canada Dollarized?
The sharp depreciation of the Canadian dollar and the successful launch of the euro have sparked a lively debate in Canada about the possible benefits of formally adopting the U.S. dollar as our national currency. Some observers have suggested that this debate is largely irrelevant, since Canada is already highly "dollarized." Canadian businesses and households, they assert, often use the U.S. dollar to perform standard money functions in preference to their own currency. Very little evidence has been provided, however, to support these claims. The authors review the available data with a view to drawing some tentative conclusions about the extent to which Canada has already been informally dollarized. The evidence suggests that many of the concerns that have been expressed about the imminent demise of the Canadian dollar have been misplaced. The Canadian dollar continues to be used as the principal unit of account, medium of exchange, and store of value within our borders. Moreover, there is no indication that dollarization is likely to take hold in the foreseeable future. Indeed, in many respects, the Canadian economy is less dollarized now than it was 20 years ago.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Exchange rate regimes
November 20, 2002
CLS Bank: Managing Foreign Exchange Settlement Risk
In the foreign exchange market, where average daily turnover is in trillions of dollars and trades span time zones, legal systems, and domestic payments systems, participants take on various risks. The most serious risk is credit risk—the risk that one party will fail to pay. Central banks, private sector financial institutions, and domestic payments systems operators laboured for more than a decade to develop a multi-currency settlement system to deal with these risks. The result, the CLS Bank, began operations in September 2002. It virtually eliminates the credit risk inherent in foreign exchange transactions by providing a payment-versus-payment arrangement for settlement. The CLS Bank is regulated by the Federal Reserve Board in consultation with the central banks that have currencies settling through its system. At present there are seven currencies, including the Canadian dollar. The Bank of Canada acts as banker for the CLS Bank, providing it with a settlement account and making and receiving payments on its behalf through the Large Value Transfer System. With the participation and support of the world's largest foreign-exchange-dealing institutions, and growing membership, the CLS Bank has the potential to become the dominant global mechanism for settling foreign exchange transactions.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Payment clearing and settlement systems
November 19, 2002
Purchasing-Power Parity: Definition, Measurement, and Interpretation
This article examines the concept of purchasing-power parity (PPP) and its implications for the equilibrium value of the Canadian exchange rate. PPP has two main applications, as a theory of exchange rate determination and as a means to compare living standards across countries. Concerning exchange rate determination, PPP is mainly useful as a reminder that monetary policy has no long-run impact on the real exchange rate, since the exchange rate can deviate persistently from its PPP value in response to real shocks. To compare living standards across countries, PPP exchange rates constructed by comparing the prices of national consumption baskets are used to translate per capita national incomes into a common currency. These rates are useful because they offset differences in national price levels to obtain comparable measures of purchasing power, but they are not an accurate measure of the equilibrium value of the exchange rate. The authors conclude that the current deviation of the Canadian exchange rate from the PPP rate does not imply that the exchange rate is undervalued, but that this deviation reflects the impact of persistent real factors, in particular, lower commodity prices.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Exchange rates
Alternative Public Spending Rules and Output Volatility
Staff Working Paper 2002-37
Jean-Paul Lam,
William Scarth
One of the central lessons learned from the Great Depression was that adjusting government spending each year to balance the budget increases the volatility of output.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Economic models,
Fiscal policy,
Monetary policy transmission
JEL Code(s):
E,
E5,
E52,
E58,
E6,
E62
An Eclectic Approach to Estimating U.S. Potential GDP
Staff Working Paper 2002-36
Marc-André Gosselin,
René Lalonde
The authors describe the principal results obtained from a new method applied to the estimation of potential U.S. GDP.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Business fluctuations and cycles,
Econometric and statistical methods,
Potential output
JEL Code(s):
C,
C3,
C32,
E,
E2,
E23,
E3,
E32
The Impact of Common Currencies on Financial Markets: A Literature Review and Evidence from the Euro Area
Staff Working Paper 2002-35
Liliane Karlinger
This paper reviews both the theoretical and empirical literature on the impact of common currencies on financial markets and evaluates the first three years of experience with Economic and Monetary Union (EMU).
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Exchange rate regimes,
Financial markets
JEL Code(s):
E,
E4,
E44,
F,
F2,
F21,
F3,
F36,
G,
G1,
G15
How Do Canadian Banks That Deal in Foreign Exchange Hedge Their Exposure to Risk?
Staff Working Paper 2002-34
Chris D'Souza
This paper examines the daily hedging and risk-management practices of financial intermediaries in the Canadian foreign exchange (FX) market.
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Financial institutions,
Financial markets,
Market structure and pricing
JEL Code(s):
F,
F3,
F31,
G,
G1,
G14,
G2,
G21