Balance of payments and components

• June 16, 2006

  Global Imbalances—Just How Dangerous?

  Bank of Canada Review - Spring 2006 Bruce Little, Robert Lafrance

  The combination of rising current account surpluses in Asia and a growing current account deficit in the United States has raised concerns that the resulting imbalances pose a threat to the world economy, especially if they are reversed in a disorderly manner. Some experts believe that normal market forces will resolve these imbalances over time; others argue that policy-makers should facilitate the adjustment with policies that curb domestic demand in deficit countries and stimulate it in surplus countries. Little and Lafrance provide a guide to the major issues and controversies involved in the debate.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Balance of payments and components, Exchange rates, International topics
• October 25, 2005

  Exports, Imports, and the Appreciation of the Canadian Dollar

  Bank of Canada Review - Autumn 2005 Richard Dion, Michel Laurence, Yi Zheng

  An objective assessment of the effects of the appreciation of the Canadian dollar in 2003 and 2004 on exports and imports requires a detailed review of the numerous other factors which may have been at play. Dion, Laurence, and Zheng discuss the influences that have affected Canada's international trade over the past two years, including exchange rate movements, global and sector-specific shocks, constraints on the domestic supply of a few products, and competition from emerging economies, most notably, China. The analysis is complemented with econometric models developed at the Bank which provide statistically valid estimates of the contribution of the Canadian-dollar appreciation to the recent developments in exports and imports.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Balance of payments and components, Exchange rates, International topics
• October 22, 2005

  How the Appreciation of the Canadian Dollar Has Affected Canadian Firms: Evidence from the Bank of Canada Business Outlook Survey

  Bank of Canada Review - Autumn 2005 Jean Mair

  To track how firms were affected by the appreciation of the Canadian dollar in 2003 and 2004 and the steps they took in response, the Bank included supplementary questions in the quarterly Business Outlook Survey conducted by its regional offices. About half of the firms surveyed reported being adversely affected, one-quarter experienced a favourable impact, and the remainder reported no effect. Jean Mair classifies and summarizes the firms' responses, identifying the sectors that were most and least affected. Causes of the impacts are identified, as well as the actions firms took as a result of the appreciation. The article looks at these actions over time to see what they tell us about firms' adjustment process.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Balance of payments and components, Exchange rates, Recent economic and financial developments
• April 20, 2005

  Conference Summary: Canada in the Global Economy

  Bank of Canada Review - Spring 2005 Lawrence L. Schembri

  The Bank of Canada's 2004 research conference examined the real and financial linkages between the Canadian economy and the economies in the rest of the world. Although Canada has profited enormously from its openness to international trade in goods, services, and financial assets, many of the most significant shocks to the Canadian economy in recent years have come from abroad. For these reasons, understanding the extent and nature of the external linkages, their implications for the Canadian economy, and the process by which the Canadian economy adjusts to external shocks is of critical importance both for monetary policy and for monitoring the financial system. This article describes the purpose of the conference—to deepen economists' understanding of these important issues—and provides highlights of the papers presented in each of the five sessions, as well as summaries of the keynote lecture and the discussion of the policy panel.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Balance of payments and components, Exchange rates, International topics

• A Structural VAR Approach to the Intertemporal Model of the Current Account

  Staff Working Paper 2003-42 Takashi Kano

  The intertemporal current account approach predicts that the current account of a small open economy is independent of global shocks, and that responses of the current account to country-specific shocks depend on the persistence of the shocks. The author shows that these predictions impose cross-equation restrictions (CERS) on a structural vector autoregression (SVAR).

  Content Type(s): Staff research, Staff working papers Topic(s): Balance of payments and components, Monetary aggregates JEL Code(s): F, F3, F32, F4, F41

• Fiscal Policy and External Balance in the G-7 Countries

  Technical Report No. 60 Stephen S. Poloz

  This paper assesses evidence, from the G-7 countries, of a link between a country's fiscal policy and its external balance, often referred to as the "twin deficits" phenomenon. It begins by reviewing the stylized facts, and then examines the theoretical case for such a link.

  Content Type(s): Staff research, Technical reports Topic(s): Balance of payments and components, Fiscal policy, International topics JEL Code(s): F, F3, F32, F4, F41, H, H6, H60

• International Capital Mobility and Asset Substitutability: Some Theory and Evidence on Recent Structural Changes

  Technical Report No. 44 Francesco Caramazza, Kevin Clinton, Agathe Côté, David Longworth

  This study examines different aspects of the international integration of capital markets. In particular, it attempts to determine whether the changes in controls and regulatory policies that have occurred in the past decade have been associated with a greater degree of market integration.

  Content Type(s): Staff research, Technical reports Topic(s): Balance of payments and components, Financial markets JEL Code(s): F, F2, F20, G, G1, G11, G15

• The Investment Supply Response of Traded-Goods Industries

  Technical Report No. 37 Paul Boothe

  In this paper, the author uses neoclassical investment equations to examine investment behaviour in four groups of Canadian industries: export-oriented, import-competing, two- way-trade, and low-trade.

  Content Type(s): Staff research, Technical reports Topic(s): Balance of payments and components JEL Code(s): E, E2, E22

• An Econometric Model of the Steel Trade

  Technical Report No. 33 Richard Dion

  In this report, the author uses steel as a case study for an analysis at the industrial level of forces at work in the international economy that have had an important impact on recent Canadian economic performance. Prominent among those forces are cost competitiveness and aggregate demand in Canada and abroad.

  Content Type(s): Staff research, Technical reports Topic(s): Balance of payments and components, Economic models JEL Code(s): C, C5, C51, F, F1, F14