canadian dollar

U.S. suspicion of Chinese investment an opportunity for Canada

Chinese companies have recently made takeover offers for a U.S.-based technology products distributor and General Electric's appliance division.

A low dollar and cheap oil didn’t rescue Ontario and Quebec before

One of the more persistent myths about prosperity is that it results purely from luck. Often, commentators credit the mere presence of oil, gas, potash and other natural resources for Western Canada’s recent (and presently fading) boom in investment, jobs and government revenues.

Printer-friendly version
Economic Consequences of a Lower Canadian Dollar

After hovering around parity with the US dollar for three years, Canada?s exchange rate fell sharply in 2013, ending the year near 90 cents (US). Initially, the lower dollar was greeted with relief, especially for our manufacturing exporters. But as the dollar continued to slide, people became more conscious of the costs to the domestic economy of a lower exchange rate: the benefits of a weaker loonie are likely to be small compared with its costs.

Export volumes have shown little sensitivity to the exchange rate, with growth in foreign export markets their main determinant.

Manufacturers benefit the least from the lower dollar, as they use the most imported inputs. Natural resource industries profit the most. Prices will rise for important sectors of consumer, business and government spending in Canada. Energy is affected the most, where an integrated North American market sets one price in US dollars.

Printer-friendly version

Between 1977 and 1980 the Canadian dollar declined by more than 20 per cent compared to a weighted average of the currencies of 15 major industrial nations. Should we worry about the dollar? This author says no.

Chapter 1 sets the stage and presents a number of popular and fallacious views about the dollar crisis. Chapter 2 examines recent trends in unemployment, inflation, domestic and foreign interest rates, and in the value of our dollar in terms of the U.S. dollar and other major currencies. Chapter 3 then proceeds with an analysis of the fundamental factors determining the international value of the Canadian dollar in the long run. The short-run factors determining the dollar's value are addressed in Chapter 4, followed by a discussion of the relationship between interest rates and the dollar in Chapter 5. Chapter 6 investigates the reasons for the most recent decline in the dollar and considers what, if anything, can and should be done about it. The final chapter deals with the question of whether we should be losing any sleep over the problems of the Canadian dollar.

Subscribe to RSS - canadian dollar