The Changing Effects of Energy-Price Shocks on Economic Activity and Inflation

In this article the author examines the effects that major changes in energy prices in recent years have had on inflation and on the pace of economic expansion. These are then compared with the effects of the oil-price shocks that occurred in the 1970s and early 1980s. Changes in the intensity of energy use are examined, as well as developments in Canada's merchandise trade surplus in energy commodities and products. The author also considers the effects that a monetary policy anchored to low and stable inflation could have on price-setting behaviour and thus on the pass-through of higher energy costs to core inflation in Canada and in other industrial countries.

Recent Developments in Global Commodity Prices: Implications for Canada

The authors examine the recent evolution of commodity prices. They discuss the factors behind the price declines that occurred between the summer of 1997 and the end of 1998, including the key supply factors and the drop in Asian demand caused by that region's concurrent financial and economic crisis. They then review the effects of the reduction in world commodity prices on economic activity in Canada. They point out that the depreciation of the Canadian dollar against the U.S.dollar, together with the continued strength of the U.S.economy, has partly offset the negative effects on Canadian aggregate demand.

Implications of Uncertainty about Long-Run Inflation and the Price Level

This paper surveys recent developments in the theoretical and empirical literature on the economic implications of uncertainty about the longer-term outlook for inflation. In particular, the linkages between inflation, long-run inflation uncertainty, and aggregate economic activity in industrial economies have become considerably better understood during the past decade. In the case of Canada, there is evidence that uncertainty about long-run inflation fell considerably between the high-inflation period of the 1970s and early 1980s and the subsequent moderate-inflation period, and decreased still further in the low-inflation period that has been evident since the early 1990s. As a result, both businesses and households have increasingly used longer-term financial instruments to meet their financing needs over the past two decades. In general, recent empirical work for Canada and elsewhere considerably strengthens the view that reductions in long-run inflation uncertainty can have beneficial effects on financial markets, capital spending, and ultimately aggregate levels of economic activity. Recent theoretical developments have improved our understanding of why this is so.Inflation: costs and benefits

The Electronic Purse: An Overview of Recent Developments and Policy Issues

Futurists have been speculating about the prospects for a cashless society for many years, and such predictions became more frequent following the introduction of "smart" cards -­ cards containing a computer chip -­ in the mid-1970s. One smart-card application of particular interest to central banks is the electronic purse or wallet, which carries a preloaded monetary value and can be used as a means of payment for multiple small-value purchases. This report provides an overview of current major electronic purse projects and other prepaid card applications around the world and examines selected policy issues. It is possible that electronic purses will be used to reduce the cost of small-value transactions. Although implementation of the innovation has been slow because of high start-up costs and uncertainty regarding acceptability of the device to the average consumer, a large number of purse trials are under way around the world. The soundness of both electronic purse products and their issuers could be a matter of interest to central banks and other financial regulatory bodies. Furthermore, national governments may stand to lose a substantial amount of revenue associated with the issuance of coinage and paper currency. The magnitude of such revenue losses would be difficult to estimate, however, both because of limited quantitative understanding of the various current uses of bank notes and because of uncertainty as to the relative attractiveness of electronic purses to consumers and merchants. While it is doubtful that physical currency will fall into disuse in the foreseeable future, growing familiarity with smart-card technology and the substantial reductions in the unit production costs of smart cards in recent years have nevertheless improved the prospects for a feasible electronic replacement for cash. The report concludes that over the next few years, the use of smart-card technology for single-purpose prepaid cards and for debit and credit cards is likely to become more widespread in Canada. Electronic purses may take somewhat longer to come into general use, given that substantial changes will be required both in the payments habits of consumers and in the payments infrastructure of financial institutions and retailers.Financial institutions; Payments, clearing, and settlements systems; Recent economic and financial developments

The Money-income controversy: testing for the direction of causality

Bibliography: p. 57-58

Lagging Productivity Growth in the Service Sector: Mismeasurement, Mismanagement or Misinformation?

While the service sector has been growing rapidly as a share of total output, aggregate productivity growth has generally lagged behind that of the goods sector. In this report, the author assesses a range of explanations for lagging service sector productivity growth. Measurement problems appear to be greater in services than in goods, and a detailed analysis of output measurement in the three service industries experiencing the lowest productivity growth suggests that underestimation is likely significant in finance, insurance and real estate, in community, business and personal services, and in trade. A lower level of competition in services compared with goods may also have affected productivity growth, though this impact is very hard to quantify. Explanations based on the service sector's relatively greater investment in new technology, however, are found to account at best for lagging productivity growth only in the last decade. Finally, the hypothesis that service industries are..