Canada-U.S. long-term interest differentials in the 1990sBank of Canada Review, 1998, vol. 1998, issue Spring, pages 17-38 Abstract: Long-term Canada-U.S. interest spreads have changed remarkably during the 1990s. The unusually wide spreads of the first half of the decade have given way to an unprecedented run of negative yield differentials. In this article, the author examines the conceptual aspects of yields on international assets and their application to the Canada-U.S. situation. Prior to 1995, investors were unsure that, over the long run, inflation would meet the targets set by the government and the Bank. Policy credibility was undermined by large budget deficits and political uncertainty. In the second half of the decade, confidence was re-established as the fiscal positions of governments improved, long-run price stability became established, and political concerns about Quebec lessened. As long as these fundamentals hold, long-term rates should remain relatively low, even when short-term rates rise. JEL-codes: E4 (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: http://EconPapers.repec.org/RePEc:bca:bcarev:v:1998:y:1998:i:spring:p:17-38 Ordering information: This journal article can be ordered from Access Statistics for this article More articles in Bank of Canada Review from Bank of Canada |
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