Staff research

Canada’s international competitiveness has received increasing attention in recent years as exports have fallen short of expectations and Canada has lost market share. This paper asks whether the Bank of Canada’s current effective exchange rate measure, the CERI, is still an accurate measure of Canada’s international competitiveness.

In this analytical note, we provide a comprehensive assessment of the complex structural adjustment facing the Canadian economy following the commodity price decline since mid-2014. We quantify separately the impacts coming from the commodity sector restructuring and the broader effect of significantly lower terms of trade.

A number of central banks publish their own business conditions surveys based on complex non random sampling methods. The results of these surveys influence monetary policy decisions and thus affect expectations in financial markets. To date, however, no one has computed the accuracy of these surveys because their respective non-random sampling method renders this assessment non-trivial. This paper describes a methodology for modeling complex non-random sampling behaviour, and computing relevant measures of statistical confidence, based on a given survey’s historical selection practice. We apply this framework to the Bank of Canada’s Business Outlook Survey by describing the sampling method in terms of rules-based criteria, historical practices, and Bayesian probabilities. This allows us to replicate the firm selection process using Monte Carlo simulations on a comprehensive micro-dataset of Canadian firms. We find, under certain assumptions, no evidence that the Bank’s firm selection process results in biased estimates and/or wider confidence intervals.