Exchange rates
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Labour Market Adjustments to Exchange Rate Fluctuations: Evidence from Canadian Manufacturing Industries
The authors provide some of the first empirical evidence on labour market adjustments to exchange rate movements in Canadian manufacturing industries. -
April 20, 2005
Conference Summary: Canada in the Global Economy
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. -
Do Exchange Rates Affect the Capital-Labour Ratio? Panel Evidence from Canadian Manufacturing Industries
Using industry-level data for Canadian manufacturing industries from 1981 to 1997, the authors find empirical evidence of a negative relationship between the capital-labour ratio and the user cost of capital relative to the price of labour. -
Characterization of the Dynamic Effects of Fiscal Shocks in a Small Open Economy
The author studies the macroeconomic consequences of discretionary changes in the fiscal policy instruments for Canada. -
Optimal Taylor Rules in an Estimated Model of a Small Open Economy
The authors compute welfare-maximizing Taylor rules in a dynamic general-equilibrium model of a small open economy. -
Exchange Rate Pass-Through and the Inflation Environment in Industrialized Countries: An Empirical Investigation
This paper investigates the question of whether a transition to a low-inflation environment, induced by a shift in monetary policy, results in a decline in the degree of pass-through of exchange rate movements to consumer prices. -
May 22, 2004
Exchange Rate Pass-Through in Industrialized Countries
Economists' long-standing interest in the degree to which exchange rate movements are reflected in prices was rekindled in the 1970s by a combination of rising inflation and the adoption of more flexible exchange rate regimes in many industrialized countries. Specifically, there were concerns that a large currency depreciation could degenerate into an inflationary spiral. Such fears were curtailed in the 1980s and early 1990s as industrialized countries began to reduce and stabilize their inflation rates. The low-inflation period most industrialized countries entered approximately a decade ago coincided with significant exchange rate depreciations that had much smaller effects on consumer prices than expected. This led to a belief that the extent to which exchange rate movements are passed through to consumer prices has declined. In this article, the authors examine why pass-through could be incomplete and review empirical estimates to determine whether pass-through has indeed declined, suggesting possible reasons for this decline and discussing the implications for monetary policy. -
When Bad Things Happen to Good Banks: Contagious Bank Runs and Currency Crises
The author develops a twin crisis model featuring multiple banks. -
December 22, 2003
Current Account Imbalances: Some Key Issues for the Major Industrialized Countries
The resurgence of sizable current account imbalances in the major economies in recent years, particularly the tripling of the U.S. deficit, has led to renewed academic and public discussions about their sustainability. Jacob's main objective is to show that current account balances are simply the outcome of various relative structural and cyclical forces between trading partners. He reviews the factors behind the changes in the current account positions of the three largest industrial economies (the United States, Japan, and the euro area). Two strong determinants shaping the current account balances are the faster increase in U.S. productivity compared with that of other major economies and, more recently, the loosening in the U.S. fiscal stance. Jacob also reviews a range of outside assessments from such sources as the Organisation for Economic Co-operation and Development and the International Monetary Fund, as well as the academic literature, to determine the possible risks to macroeconomic and financial stability.