Publications
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December 23, 2003
The Comparative Growth of Goods and Services Prices
For several decades, the prices of services have been rising more rapidly than the prices of goods in Canada and the other major industrialized countries. In 2002, this gap between the growth rates of these two components of the consumer price index (CPI) widened considerably, leading researchers to ask if this was the beginning of a trend. Analysis reveals, however, that the gap is based on short-term dynamics and that it appears to be independent of the trend in the development of the overall price level. Evidence also shows that the gap is eventually reabsorbed. The authors examine a number of potential causes for the prices of services to rise faster than those of goods. These include the more rapid pace of productivity growth in the goods sector, the greater openness of goods to foreign trade, and stronger growth in the demand for services. -
December 23, 2003
Financial System Review - December 2003
This section of the Financial System Review examines the recent performance of the Canadian financial system and the factors, both domestic and international, that are influencing it.
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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. -
December 21, 2003
The Rationale for Cross-Border Listings
Technological progress and the liberalization of capital flows have both contributed to the considerable changes in global equity markets over the past few decades. Yet obstacles to international capital flows still exist, leading to segmentation of markets and creating incentives for corporate managers to adopt financial policies such as international cross-listing. In exploring the costs and benefits of cross-listing, Chouinard and D'Souza find that U.S. exchanges are attracting an increasing share of cross-listed firms. The empirical studies they review suggest that the cost of equity capital declines following a foreign listing as a result of lower transactions costs or an improvement in the quality and quantity of firm-specific information available to investors. As well, informational asymmetries across countries prevent simultaneous price discovery across exchanges.