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The authors identify the fundamentals behind the dynamics of the U.S. stock market over the past 30 years. They specify a structural vector-error-correction model following the methodology of King, Plosser, Stock, and Watson (1991).

The author describes the rapid development of the syndicated corporate loan market in the 1990s. He explores the historical forces that led to the development of the contemporary U.S. syndicated loan market, which is effectively a hybrid of the investment banking and commercial banking worlds.

The authors develop an index of financial stress for the Canadian financial system. Stress is defined as the force exerted on economic agents by uncertainty and changing expectations of loss in financial markets and institutions.

The authors examine how the valuation multiples assigned to the equity of Canadian-listed firms compare with the equity of comparable firms listed in the United States. They find that Canadian-listed firms trade at a discount to U.S.-listed firms across a range of valuation measures.

The authors develop a new methodology to investigate how crises cause the relationship between financial variables to change. Two possible sources of increased co-movement between markets during high-variance episodes are considered: larger common shocks operating through standard market linkages, and a structural change in the propagation of shocks between markets, called "shift contagion."

In a recent attempt to account for the equity-premium puzzle within a representative-agent model, Cecchetti, Lam, and Mark (2000) relax the assumption of rational expectations and in its place use the assumption of distorted beliefs. The author shows that the explanatory power of the distorted beliefs model is due to an inconsistency in the model and that an attempt to remove this inconsistency removes the model's explanatory power.

The benefits of transparency—the outcome of the measures taken by the central bank to allow financial markets and economic agents to understand the factors it takes into account in formulating monetary policy—are now widely recognized. These benefits include smoother implementation of monetary policy and increased effectiveness as markets improve their ability to anticipate the Bank's policy decisions and account for them in their operations. How interest rates respond to the publication of macroeconomic data depends on the degree of transparency in monetary policy, as the rates will rise or fall as a reflection of the market's revised expectations. Before the Bank of Canada adopted initiatives to improve transparency, such as the inflation-control targets, the semi-annual publication of the Monetary Policy Report and Updates, and the fixed announcement dates, changes to the overnight rate created some volatility in interest rates, and publishing Canadian macroeconomic data did not appear to have a major impact on rates. This article shows how the Bank of Canada's steps towards greater transparency have increased the impact of Canadian data on short-term interest rates and have improved financial markets' understanding of how monetary policy decisions are taken.

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).

This paper examines the daily hedging and risk-management practices of financial intermediaries in the Canadian foreign exchange (FX) market.

This paper examines the factors that lead liquidity-motivated investors to choose the type of market structure they prefer.