Rates and Statistics
Monetary Policy Indicators
Monetary Conditions Index
NOTE: MCI to be discontinued
The C-6 index and MCI will be discontinued effective 31 December 2006. The Bank has not used the MCI as an input into its monetary policy decisions for some time.
What is the monetary conditions index?
The monetary conditions index (MCI) measures the degree of ease or tightness in monetary conditions relative to a base period. The MCI captures the effect that monetary policy has on the economy both through interest rates and the exchange rate.
The interest rate receives a weight of 1, and the exchange rate receives a weight of one-third. These represent the relative effects that changes in short-term interest rates and the exchange rate have on output.
How is the MCI calculated?
The MCI is calculated as the change in the 90-day commercial paper rate since January 1987 plus one-third of the percentage change in the exchange rate of the Canadian dollar against the currencies of our major trading partners, also since 1987.
Formula
MCI = (CP90-7.9) + (100/3) x (ln(C6)-ln(91.33))where:
- CP90 = Canadian 90-day commercial paper rate
- C6 = Canadian dollar index against C-6 currencies (1992 = 100)
- 7.9 = The average 90-day commercial paper rate for Jan. 87
- 91.33 = The average C-6 exchange rate for Jan. 87
- In Jan. 1987, the MCI = 0
Are papers about the MCI available?
Papers by Chuck Freedman and Pierre Duguay are available in The Transmission of Monetary Policy in Canada.
Where can I get the data for the MCI?
Monthly data for the MCI and its components are available here.
The MCI is also available every Friday in the Weekly Financial Statistics.
What is the C-6 exchange rate?
The C-6 exchange rate is an index of the weighted-average foreign exchange value of the Canadian dollar against major foreign currencies. Weights for each country are derived from Canadian merchandise trade flows with other countries over the three years from 1994 through 1996. The index has been based to 1992 (i.e., C-6 = 100 in 1992). The C-6 index broadens the coverage of the old G-10 index to include all the countries in the EMU.
| Country | Weightings |
| United States | 0.8584 |
| EMU Countries | 0.0594 |
| Japan | 0.0527 |
| United Kingdom | 0.0217 |
| Switzerland | 0.0043 |
| Sweden | 0.0035 |
Formula
C6 = 100*(1/((USA**0.8584)*(Japan**0.0527)*(UK**0.0217)*
(Sweden**0.0035)*(Switzerland**0.0043)*(EMU**0.0594)))/1.046294
- Enter currencies as $Can/$foreign currency.
- Prior to 1999, currencies from the individual EMU countries are used.
Note: ** means exponent, * means multiply, / means divide
Questions?
Questions concerning the MCI can be directed to Public Affairs