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Text of major 1995 lecture by Bank Governor Gordon Thiessen, plus articles from Bank of Canada Review and other sources

Canada’s Short-Term Indicator (CSI) is a new model that exploits the information content of 32 indicators to produce daily updates to forecasts of quarterly real GDP growth. The model is a data-intensive, judgment-free approach to short-term forecasting. While CSI’s forecasts at the start of the quarter are not very accurate, the model’s accuracy increases appreciably as more information becomes available. CSI is the latest addition to a wide range of models and information sources that the Bank of Canada uses, combined with expert judgment, to produce its short-term forecasts.

We examine the relationship between firms’ performance and credit constraints affecting export market entry. Using administrative Canadian firm-level data, our findings show that new exporters (a) increase their productivity, (b) raise their leverage ratio and (c) increase investment. We estimate that 48 percent of Canadian manufacturers face binding credit constraints when deciding whether to enter export markets.

In recent years, the Canadian economy has been affected by strong movements in relative prices brought about by the surging costs of energy and non-energy commodities, with significant implications for the terms of trade, the exchange rate, and the allocation of resources across Canadian sectors and regions.

Offline functionality is a key consideration for a potential CBDC. We describe the different types of offline functionality based on their duration outside of network connection—either intermittent (for short periods) or extended (for longer periods). We discuss the advantages and drawbacks of each and consider implications for end-user devices, system resilience and universal accessibility.

Using a closed-economy model, Jensen (2002) and Walsh (2003) have, respectively, shown that a policy regime that optimally targets nominal income growth (NIT) or the change in the output gap (SLT) outperforms a regime that targets inflation, because NIT and SLT induce more inertia in the actions of the central bank, effectively replicating the outcome obtained under precommitment. The author obtains a very different result when the analysis is extended to open-economy models.

This issue of the Financial System Review reflects the Bank’s judgment that high household indebtedness and housing market imbalances remain the most important vulnerabilities. While these vulnerabilities remain elevated, policy measures continue to improve the resilience of the financial system. A third vulnerability highlighted in the FSR concerns cyber threats to an interconnected financial system.

Would a shift in trading in fixed-income markets—from over the counter (bilateral trading) to a centralized electronic platform—improve welfare? We use trade-level data on the secondary market for Government of Canada debt to answer this question.

The substantial growth in wealth over the course of the second half of the 1990s generated the equivalent of a certain level of savings, while simultaneously causing household savings rates to fall significantly. The author seeks to explain this decline in savings, observed since 1995, using the methodology developed by King, Plosser, Stock, and Watson (1991).

The purpose of this paper is twofold. First, we provide a detailed social accounting matrix (SAM), which incorporates the income and financial flows into the standard input-output matrix, for the Canadian economy for 2004.