Exchange rates

• December 15, 1999

  The Exchange Rate, Productivity, and the Standard of Living

  Bank of Canada Review - Winter 1999–2000 Robert Lafrance, Lawrence L. Schembri

  This article examines the recent proposition that the decline in Canada's standard of living relative to that of the United States is causally related to the decline in our exchange rate. The authors explore the main channels through which the exchange rate and the standard of living could be related—productivity and the terms of trade—focusing mainly on productivity. They conclude that the decline in world commodity prices and weak demand for domestic output were affecting both Canada's standard of living and the exchange rate and that the flexible exchange rate regime itself did not play an independent role.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Exchange rates
• November 14, 1999

  Real Exchange Rate Indexes for the Canadian Dollar

  Bank of Canada Review - Autumn 1999 Robert Lafrance, Pierre St-Amant

  In this article, the authors explain the methodology used to construct real exchange rate (RER) indexes. They also compare and assess various Canadian RER indexes from both an empirical and conceptual standpoint. The authors conclude that both theory and empirical evidence suggest that the best RER indexes are those based on unit labour costs. They note, however, that, for practical reasons, policy-makers should also consider RER indexes based on prices when formulating monetary policy.

  Content Type(s): Publications, Bank of Canada Review articles Topic(s): Exchange rates

• Canada's Exchange Rate Regime and North American Economic Integration: The Role of Risk-Sharing Mechanisms

  Staff Working Paper 1999-17 Zahir Antia, Ramdane Djoudad, Pierre St-Amant

  Our contribution in this paper is threefold. First, we survey the empirical literature on consumption smoothing mechanisms of regional economic shocks. Second, building on the work of Asdrubali et al. (1996), we present evidence on the role played by various smoothing mechanisms for specific economic shocks affecting Canadian provinces. Third, we assess whether smoothing mechanisms […]

  Content Type(s): Staff research, Staff working papers Topic(s): Exchange rate regimes, Exchange rates JEL Code(s): F, F3, F33, F36, G, G1, G15

• Why Canada Needs a Flexible Exchange Rate

  Staff Working Paper 1999-12 John Murray

  This paper explores the arguments for and against a common currency for Canada and the United States and attempts to determine whether such an arrangement would offer any significant advantages for Canada compared with the present flexible exchange rate system. The paper first reviews the theoretical arguments advanced in the economics literature in support of fixed and flexible currency arrangements. A discussion of Canada's past experience with the two exchange rate systems follows, after which there is a survey of the empirical evidence published on Canada's current and prospective suitability for some form of fixed currency arrangement with the United States. The final section of the paper examines critically a number of concerns raised about the behaviour of the current flexible exchange rate system.

  Content Type(s): Staff research, Staff working papers Topic(s): Exchange rates JEL Code(s): F, F3, F31

• Real Effects of Collapsing Exchange Rate Regimes: An Application to Mexico

  Staff Working Paper 1999-10 Patrick Osakwe, Lawrence L. Schembri

  This paper examines the impact of a collapsing exchange rate regime on output in an open economy in which shocks to capital flows and exports predominate. A sticky-price rational expectations model is used to compare the variability of output under the collapsing regime to that under alternative fixed and flexible regimes. Output is found to […]

  Content Type(s): Staff research, Staff working papers Topic(s): Exchange rates JEL Code(s): F, F3, F31, F4, F41

• The Exchange Rate Regime and Canada's Monetary Order

  Staff Working Paper 1999-7 David Laidler

  It is a mistake to debate the merits of alternative exchange rate regimes for Canada independently of other features of the monetary order. A coherent order requires a well-defined goal for monetary policy, one that the authorities are capable of achieving, and that anchors private sector expectations. For it to be liberal, the relevant authorities […]

  Content Type(s): Staff research, Staff working papers Topic(s): Exchange rates, Monetary policy framework JEL Code(s): E, E5, E52, F, F3, F31

• An Intraday Analysis of the Effectiveness of Foreign Exchange Intervention

  Staff Working Paper 1999-4 Neil Beattie, Jean-François Fillion

  This paper assesses the effectiveness of Canada's official foreign exchange intervention in moderating intraday volatility of the Can$/US$ exchange rate, using a 2-1/2-year sample of 10-minute exchange rate data. The use of high frequency data (higher than daily frequency) should help in assessing the impact of intervention since the foreign exchange market is efficient and […]

  Content Type(s): Staff research, Staff working papers Topic(s): Exchange rates, Financial markets JEL Code(s): F, F3, F31, G, G1, G15