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Changes in investors' risk appetite have been used to explain a variety of phenomena in asset markets.

Canada's Large Value Transfer System (LVTS) is designed to meet international risk-proofing standards at a minimum cost to participants in terms of collateral requirements.

Innovations in communications and information technology and the related globalization of financial markets have created the potential for important changes to the structure of Canadian equity markets. Established marketplaces can now compete more effectively on an inter-regional and international basis. At the same time, reduced costs have lowered the barriers to entry faced by new competitors known as alternative trading systems (ATSs). In response to this heightened competition, established Canadian stock exchanges have taken measures to improve market quality. While regulators see innovation as positive for the development of Canadian markets, there is some concern that market liquidity may be fragmented in the short run. The Canadian Securities Administrators have proposed a framework that attempts to address this issue and that would allow ATSs to compete with traditional exchanges for the first time. The authors provide an overview of the Canadian equity market and its structure, focusing on these recent developments.

Several authors have presented reduced-form evidence suggesting that the degree of exchange rate pass-through to the consumer price index has declined in Canada since the early 1980s and is currently close to zero.

The days when secrecy and opacity were the bywords of central banking are gone. The advent of inflation targeting in the early 1990s acted as the catalyst for enhanced transparency and communications in the conduct of monetary policy.

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 […]

This paper reviews various competing theories of structural unemployment and considers whether they may be used to explain any of the rise in unemployment experienced by Canada during the most recent economic cycle.

With the demise of monetary targeting over the past 20 years in many major countries, the question has arisen as to whether central banks should look at money at all when formulating and conducting monetary policy.

Phillips curves are generally estimated under the assumption of linearity and parameter constancy. Linear models of inflation, however, have recently been criticized for their poor forecasting performance.

For several decades, the prices of services have been rising more rapidly than the prices of goods in Canada and the other major industrialized countries. In 2002, this gap between the growth rates of these two components of the consumer price index (CPI) widened considerably, leading researchers to ask if this was the beginning of a trend. Analysis reveals, however, that the gap is based on short-term dynamics and that it appears to be independent of the trend in the development of the overall price level. Evidence also shows that the gap is eventually reabsorbed. The authors examine a number of potential causes for the prices of services to rise faster than those of goods. These include the more rapid pace of productivity growth in the goods sector, the greater openness of goods to foreign trade, and stronger growth in the demand for services.