Daniel Racette

The impact of exchange rate variability on trade flows: Further results on sectoral U.S. imports from Canada

Abstract In this study, we provide additional empirical evidence on the effects of exchange rate variability on trade flows. We focus on trade between Canada and the United States in five sectors with substantial shares of bilateral trade between the two countries. Beside our sectoral approach, our contribution is to address econometric problems raised by the use of proxies for risk using the non-parametric approach suggested by Pagan and Ullah (1988). We adopt risk measures based on three-month forecast errors on the forward market. Our results generally indicate that exchange rate variability has not significantly depressed the volume of trade between Canada and the United States during the present floating rate period.

The Canadian-US dollar exchange rate: A test of alternative models for the seventies

Abstract Three basic models of bilateral exchange-rate determination are evaluated on the basis of the Canadian experience in the 1970s. We examine wealth effects and incorporate consistent expectations in the traditional models. Based on reduced-form equations, empirical results reject a simple monetary approach and the stickly-price asset market model but concur with a version of the stock-flow model of exchange-rate determination.

Canadian Monetary Policy: Will the Checklist Approach Ever Get Us to Price Stability?

The purpose of this paper is to investigate whether the checklist approach that the Bank of Canada has followed in one way or another over the last two decades is likely to lead us to the stated objective of price stability. The analysis of Canadian monetary policy is performed through the estimation of a Bayesian VAR model of a set of important Canadian macroeconomic variables in their international context. To estimate the model the authors borrowed form C. Sims (1989), but they also transposed his methodology to take into account Canadian features. The results suggest that the exchange rate has been high on the checklist of the Bank of Canada over the years and that, rather, the Bank should concentrate its attention on (broad) monetary aggregates if it really wants to deliver price stability.

Canadian Monetary Policy 1989-1993: What Were the Bank of Canada's True Actions in the Determination of Monetary Conditions?

During its recent battle against inflation from 1988 to the present, the Bank of Canada has been accused of all the evils that plagued the Canadian economy: high dollar and interest rates, recession, and slow recovery. The purpose of this paper is to analyse the action taken by the Bank during the period from 1989 to 1993 in order to characterize precisely the way monetary policy was conducted during this period. We find that, contrary to what analysts have usually stated, monetary policy actions were far from tight in 1989. However, from 1990 on, the Bank took a series of restrictive actions in order to discipline financial markets giving an undue importance to its objective of orderly markets to the detriment of monetary expansion.