August 22, 2003 Measuring Interest Rate Expectations in Canada Bank of Canada Review - Summer 2003 Grahame Johnson Financial market expectations regarding future changes in the target for the overnight rate of interest are an important source of information for the Bank of Canada. Financial markets are the mechanism through which the policy rate affects other financial variables, such as longer-term interest rates, the exchange rate, and other asset prices. An accurate measure of their expectations can therefore help policy-makers assess the potential impact of contemplated changes. Johnson focuses on the expectations hypothesis, which measures expectations of future levels of the target overnight rate as implied by current money market yields. Although expectations can be derived from the current yield on any short-term fixed-income asset, some assets have proven to be more accurate predictors than others. The implementation of a policy of fixed-announcements dates has coincided with the increased predictive power of these short-term assets. As a result of this improvement, a relatively simple model of the yield curve can now provide an accurate measure of financial market expectations. Content Type(s): Publications, Bank of Canada Review articles Topic(s): Exchange rates, Financial markets, Interest rates
August 22, 2003 Bank of Canada Operations during Current Power Difficulties During the current power difficulties, the Bank of Canada in Ottawa has been operating from its back-up facility to provide essential services, such as monitoring financial markets and the critical clearing and settlement systems. Content Type(s): Press, Market notices
August 21, 2003 Summer 2003 Consultations Views Sought on Issues Relating to the Design and Operation of The Real Return Bond Program A consultation document on issues relating to the design and operation of the Real Return Bond program, prepared jointly by the Department of Finance and the Bank of Canada, is being published today. Content Type(s): Press, Market notices
August 21, 2003 Real Return Bond Funding Review The Real Return Bond (RRB) program was created in line with the Government's fundamental objective of raising stable, low-cost funding.
August 21, 2003 Summer 2003 Consultation Document The purpose of these consultations is to obtain the views of market participants on issues relating to the design and operation of the government Real Return Bond (RRB) program.
August 21, 2003 Dollarization in Canada: An Update Bank of Canada Review - Summer 2003 John Murray, James Powell, Louis-Robert Lafleur The authors describe a special survey of the payment and financial-reporting practices of Canadian firms conducted by the Bank of Canada's regional offices to determine if the U.S. dollar has started to displace the Canadian dollar as a preferred unit of account. A cross-section of firms was asked what currency (or currencies) they used: (i) for quoting sales to Canadian customers, (ii) for quoting prices to foreigners, (iii) for reporting their financial results, and (iv) for quoting salaries and wages. The survey results reported here extend some earlier results reported in a previous Review article by Murray and Powell. The data indicate that, despite the dominance of the U.S. dollar in world trade and as an international standard of value, use of the U.S. dollar in Canada is very limited. The vast majority of Canadian firms price their products and keep their financial statements in Canadian dollars, and very few workers in Canada have their salaries paid in a foreign currency. The Canadian dollar is still strongly preferred for most pricing and financial-reporting activities in Canada, and there is very little evidence of "dollarization." Content Type(s): Publications, Bank of Canada Review articles Topic(s): Exchange rate regimes
August 7, 2003 Economic Integration in North America Remarks David Dodge Couchiching Institute on Public Affairs Geneva Park, Ontario For more than 70 years now, the Couchiching Institute on Public Affairs has been bringing Canadians together with the purpose of asking some thought-provoking questions and encouraging lively, stimulating debates and action on a variety of key public policy issues. Content Type(s): Press, Speeches and appearances, Remarks
Forecasting and Analyzing World Commodity Prices Staff Working Paper 2003-24 René Lalonde, Zhenhua Zhu, Frédérick Demers The authors develop simple econometric models to analyze and forecast two components of the Bank of Canada commodity price index: the Bank of Canada non-energy (BCNE) commodity prices and the West Texas Intermediate crude oil price. They present different methodologies to identify transitory and permanent components of movements in these prices. Content Type(s): Staff research, Staff working papers Topic(s): Econometric and statistical methods JEL Code(s): C, C5
What Does the Risk-Appetite Index Measure? Staff Working Paper 2003-23 Miroslav Misina Explanations of changes in asset prices as being due to exogenous changes in risk appetite, although arguably controversial, have been popular in the financial community and have also received some attention in attempts to account for recent financial crises. Operational versions of these explanations are based on the assumption that changes in asset prices can be decomposed into a part that can be attributed to changes in riskiness and a part attributable to changes in risk aversion, and that some quantitative measure can capture these effects in isolation. Content Type(s): Staff research, Staff working papers Topic(s): Economic models, Financial markets JEL Code(s): G, G1, G12
The Construction of Continuity-Adjusted Monetary Aggregate Components Staff Working Paper 2003-22 Jeannie Kottaras Changes in the financial industry result in new data that are inconsistent with the former presentation, and therefore adjustments are required to "adjust" or smooth out these breaks to establish continuity. Content Type(s): Staff research, Staff working papers Topic(s): Monetary aggregates JEL Code(s): E, E5, E51