December 10, 1996 The maturity structure of household financial assets and liabilities Bank of Canada Review - Winter 1996-1997 Marie-Claude Montplaisir In this article, the author examines the maturity structure of the household sector's balance sheet and the degree of interest rate variability of household loans and financial assets. The bulk of households' interest-bearing assets and financial liabilities consists of medium- and long-term, fixed-rate instruments. The pattern of personal consumption is therefore influenced more by the wealth effects of interest rate changes than by their income effects, and the full impact of a permnent shift in interest rates on consumption will become apparent only after a lag. Content Type(s): Publications, Bank of Canada Review articles Topic(s): Sectoral balance sheet
December 9, 1996 The Canadian market for zero-coupon bonds Bank of Canada Review - Winter 1996-1997 Miles Whittingham A conventional bond is a debt instrument consisting of a series of periodic coupon payments plus the repayment of the principal at maturity. As the name suggests, a zero-coupon bond has no coupon payments. It has only a single payment consisting of the repayment of the principal at maturity. The zero-coupon bond is sold at a discount and then redeemed for its face value at maturity. The return to the investor is the difference between the face value of the bond and its discounted purchase price. In this article, the author examines the investment characteristics of zero-coupon bonds. In particular, a type of zero-coupon bond known as a strip bond is discussed. A strip bond is created by stripping coupon payments from conventional bonds. The strip bond market in Canada has grown substantially since the late 1980s and is now an integral part of Canadian fixed-income markets. As well, the opportunity to trade in the strip bond market improves the liquidity and efficiency of Canadian fixed-income markets, thus helping to reduce the overall cost of borrowing to the government. Content Type(s): Publications, Bank of Canada Review articles Topic(s): Financial markets
November 20, 1996 Monetary Policy Report – November 1996 This Report outlines recent developments in the Canadian economy that affect the rate of inflation and provides an account of the measures taken by the Bank of Canada to control inflation. Content Type(s): Publications, Monetary Policy Report
November 11, 1996 Productivity growth in the commercial service sector Bank of Canada Review - Autumn 1996 Dinah Maclean For over three decades, measured productivity growth in the commercial service sector has consistently lagged behind that of the goods-producing sector. At the same time, the service sector has greatly expanded its share of output and employment. Some commentators have suggested that this trend will reduce growth in total economy-wide productivity. In this article, the author reviews recent trends in productivity growth in services and the main factors affecting it. She concludes that services will likely contribute to increases in future productivity growth. There is a great diversity of experience within the service sector. While productivity is falling in some industries, factors such as technological change, deregulation, and increased competition have helped to increase it in others. Moreover, much of the growth in commercial service output is occurring in those industries with relatively high productivity growth. Difficulties in measuring output for some service activities may also be resulting in underestimation of output and productivity growth. To the extent that services are used as intermediate inputs in the production of goods, underestimating productivity growth in the service industry would cause an offsetting overestimation of productivity growth in goods-producing industries. Content Type(s): Publications, Bank of Canada Review articles Topic(s): Productivity
November 11, 1996 Bank of Canada Review - Autumn 1996 Cover page 1804 Bank of England dollar This piece is part of the National Currency Collection, Bank of Canada. Photography by James Zagon. Content Type(s): Publications, Bank of Canada Review
November 10, 1996 The market for futures contracts on Canadian bankers' acceptances Bank of Canada Review - Autumn 1996 Nancy Harvey The Montreal Exchange introduced futures contracts on 3-month Canadian bankers' acceptances, known as BAX, in 1988. In this article, the author explains the nature of this new instrument, which is bought and sold on the floor of the Exchange, and its role in hedging, speculation, and arbitrage. She briefly reviews the technical aspects of the market and explains the difference between BAX contracts and forward rate agreements. She also examines the market's rapid growth and its relationship to the market for treasury bills. Content Type(s): Publications, Bank of Canada Review articles Topic(s): Financial markets
November 9, 1996 Canada and international financial institutions Bank of Canada Review - Autumn 1996 Robert Lafrance, James Powell International financial institutions, such as the International Monetary Fund, the World Bank and the Bank for International Settlements, are important players in the global financial system. This article provides an overview of the major international financial institutions to which Canada belongs. The paper highlights their activities and the nature of Canada's involvement, including that of the Bank of Canada. Recent initiatives coming out of the Halifax and Lyon Summits to improve the effectiveness of international financial institutions are also noted. Content Type(s): Publications, Bank of Canada Review articles Topic(s): International topics
November 8, 1996 Money markets and central bank operations: Conference summary Bank of Canada Review - Autumn 1996 Mark Zelmer This article summarizes the proceedings of a conference hosted by the Bank of Canada in November 1995. The conference examined the interaction between monetary policy operations and the money market. It provided an opportunity to assess current operations before the introduction of a large-value transfer system leads the Bank to change the techniques it uses to implement monetary policy on a day-to-day basis. From the Bank's perspective, the papers prepared externally provided some useful insights into recent innovations in money markets and their implications for the implementation of monetary policy. Meanwhile, the sessions devoted to the Bank's operations in financial markets were designed to provide market practitioners and academics with further insight into how the Bank operates in these markets. Content Type(s): Publications, Bank of Canada Review articles Topic(s): Monetary policy implementation
Do Mechanical Filters Provide a Good Approximation of Business Cycles? Technical Report No. 78 Alain Guay, Pierre St-Amant In this paper, the authors examine how well the Hodrick-Prescott filter (HP) and the band-pass filter recently proposed by Baxter and King (BK) extract the business-cycle component of macroeconomic time series. Content Type(s): Staff research, Technical reports Topic(s): Econometric and statistical methods JEL Code(s): C, C5, C52, E, E3, E32
A Modified P*-Model of Inflation Based on M1 Staff Working Paper 1996-15 Joseph Atta-Mensah This paper examines the performance of M1 in an indicator-model of inflation over time horizons as long as 16 quarters into the future. Content Type(s): Staff research, Staff working papers Topic(s): Economic models JEL Code(s): E, E3, E37