December 16, 1999
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2380
result(s)
December 15, 1999
The Exchange Rate, Productivity, and the Standard of Living
This article examines the recent proposition that the decline in Canada's standard of living relative to that of the United States is causally related to the decline in our exchange rate. The authors explore the main channels through which the exchange rate and the standard of living could be related—productivity and the terms of trade—focusing mainly on productivity. They conclude that the decline in world commodity prices and weak demand for domestic output were affecting both Canada's standard of living and the exchange rate and that the flexible exchange rate regime itself did not play an independent role.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Exchange rates
December 14, 1999
Trends in Canada's Merchandise Trade
The author examines aspects of Canada's trade performance in light of the major trends seen in world trade over the past several decades. Canada has become more integrated with the world economy, and this openness is evident from its greater export orientation, its heavier reliance on imported inputs, and more exposure to foreign competition in its domestic markets. The author analyzes the composition of Canadian trade and the trend towards increasing two-way trade in similar products. He also looks at the increasing integration of trade within regions, which for Canada has meant a greater concentration of exports with the United States.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
International topics
December 13, 1999
Feedback Rules for Inflation Control: An Overview of Recent Literature
Feedback rules are rules aimed at guiding policy-makers as they face the problem of keeping inflation close to a desired path without causing variability elsewhere in the economy. These rules link short-term interest rates, controlled by the central bank, to the rate of inflation and/or its deviation from a target rate. The authors describe the most popular types of feedback rules and review some simulation results.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Interest rates
The Expectations Hypothesis for the Longer End of the Term Structure: Some Evidence for Canada
Staff Working Paper 1999-20
Ron Lange
This paper assesses the expectations theory for the longer end of the term structure of Canadian interest rates using three empirical approaches that have received attention in the literature: (i) cointegration tests of the long-run unbiasedness hypothesis; (ii) simulations of a theoretical long-term yield that is consistent with the expectations hypothesis, and (iii) ex post […]
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Interest rates
JEL Code(s):
E,
E4,
E43
November 16, 1999
The Corporate Bond Market in Canada
The Canadian corporate bond market has experienced a renaissance, in recent years, against a background of low inflation, reduced public borrowing, and the lowest levels of long-term interest rates in a generation. The authors examine the influences shaping the market and also compare the Canadian market with those of other countries. The increased level of activity in the market has been accompanied by the development of new products and by greater investor interest in instruments with higher returns and higher credit risk. A more dynamic Canadian corporate bond market is a welcome development since it offers borrowers an alternative source of funds, especially companies that have typically relied on the banking system and on the U.S. corporate bond market for financings involving higher levels of credit risk.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Financial markets
November 15, 1999
Markets for Government of Canada Securities in the 1990s: Liquidity and Cross-Country Comparisons
In this article, the author reviews the factors behind the recent evolution of liquidity in the market for Government of Canada (GoC) securities. He finds that liquidity has been supported by changes in the structure of the market, notably the introduction and increasing size of benchmark bond issues. He also notes that while the GoC bond market has generally benefited from changes in market structure, liquidity in the treasury bill market has decreased since the mid-1990s, largely because of the declining supply of these securities. This article also presents some comparisons of liquidity in the government securities markets of other industrialized countries and finds that liquidity in the Canadian market appears to compare favourably with all but the large U.S. Treasury market.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Financial markets
Pricing Interest Rate Derivatives in a Non-Parametric Two-Factor Term-Structure Model
Staff Working Paper 1999-19
John Knight,
Fuchun Li,
Mingwei Yuan
Diffusion functions in term-structure models are measures of uncertainty about future price movements and are directly related to the risk associated with holding financial securities. Correct specification of diffusion functions is crucial in pricing options and other derivative securities. In contrast to the standard parametric two-factor models, we propose a non-parametric two-factor term-structure model that […]
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Econometric and statistical methods,
Market structure and pricing
JEL Code(s):
C,
C1,
C14,
C2,
C22,
G,
G1,
G13
November 14, 1999
Real Exchange Rate Indexes for the Canadian Dollar
In this article, the authors explain the methodology used to construct real exchange rate (RER) indexes. They also compare and assess various Canadian RER indexes from both an empirical and conceptual standpoint. The authors conclude that both theory and empirical evidence suggest that the best RER indexes are those based on unit labour costs. They note, however, that, for practical reasons, policy-makers should also consider RER indexes based on prices when formulating monetary policy.
Content Type(s):
Publications,
Bank of Canada Review articles
Topic(s):
Exchange rates
Estimating One-Factor Models of Short-Term Interest Rates
Staff Working Paper 1999-18
Des Mc Manus,
David Watt
There currently exists in the literature several continuous-time one-factor models for short-term interest rates. This paper considers a wide range of these models that are nested into one general model. These models are approximated using both a discrete-time model and a model that accounts for aggregation effects over time, and are estimated by both the […]
Content Type(s):
Staff research,
Staff working papers
Topic(s):
Financial markets,
Interest rates
JEL Code(s):
C,
C5,
C52,
G,
G1,
G10