Advanced Search
MyIDEAS: Login

Quelques résultats empiriques relatifs à l'évolution du taux de change Canada/États-Unis

Contents:

Author Info

  • Ramdane, Djoudad
  • Tessier, David

Abstract

This paper explores the extent to which factors other than commodity and energy prices may have contributed to the Canadian dollar's depreciation since the early 1970s. The variables considered include among others budgetary conditions and productivity. The approach involves a long-term determination, using cointegration methodology, of variables that may have played a major role in the behaviour of the real exchange rate. The authors conclude that, while growing indebtedness in Canada has contributed to the Canadian currency's depreciation against the U.S. dollar, it explains only 20 per cent of that decline during the 1990s. Non technical summary Amano and van Norden (1995) have developed a model for determining the real Can$/US$ exchange rate that has proven itself particularly robust over time, in terms of statistical significance and stability. This model consists of both short- and long-term components. The long-term component takes the form of a term of error correction arising from a linear relationship between the real exchange rate, commodity prices (excluding energy), and the price of energy. The short-term dynamic is essentially induced by the spread between interest rates in Canada and the United States. In this paper, the authors attempt to examine the extent to which factors other than commodity and energy prices may have contributed to the Canadian dollar's depreciation since the early 1970s. The variables considered are selected on the basis of theoretical or earlier empirical criteria, and include the productivity gap between Canada and the United States, the gap in the ratio of public spending to GDP, the gap in income per capita, net foreign assets, and the gap in the ratios of public debt to GDP. Of these variables, only the gap between debt-to-GDP ratios in Canada and the United States would appear to provide any additional information. Including this variable improves the global specification of the model and its predictive power, especially for the period relating to the early 1990s. Although commodity price variable continue to dominate real exchange rate dynamics over the entire sample, debt assumes ever greater importance from the mid-1980s, when the Canada-U.S. indebtedness gap began to widen. The portion attributable to indebtedness tends to fade towards the end of the 1980s, but reasserts itself in the mid-1990s, when the indebtedness gap (as a proportion of GDP) reached record levels. The indebtedness gap at that time could explain as much as 20 per cent of the depreciation of Canada's real exchange rate, but this percentage starts to decline towards the end of 1997, as the country's public finances strengthened. It is noteworthy that the price of energy becomes steadily less significant as the estimation period is lengthened. Thus, the commodity price index and the Canada-U.S. indebtedness gap alone provide an almost complete explanation of real exchange rate behaviour over the period 1974-1998. This observation is consistent with various empirical tests that point to a continuous drop in the predictive power of energy prices in several macroeconomic relationships.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.bankofcanada.ca/wp-content/uploads/2010/01/wp00-4.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Bank of Canada in its series Working Papers with number 00-4.

as in new window
Length: 37 pages
Date of creation: 2000
Date of revision:
Handle: RePEc:bca:bocawp:00-4

Contact details of provider:
Postal: 234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada
Phone: 613 782-8845
Fax: 613 782-8874
Web page: http://www.bank-banque-canada.ca/

Related research

Keywords: Exchange rates;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

No references listed on IDEAS
You can help add them by filling out this form.

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Illing, Mark & Liu, Ying, 2006. "Measuring financial stress in a developed country: An application to Canada," Journal of Financial Stability, Elsevier, vol. 2(3), pages 243-265, October.
  2. Celine Gauthier & David Tessier, 2002. "Supply Shocks and Real Exchange Rate Dynamics: Canadian Evidence," Working Papers 02-31, Bank of Canada.
  3. Mark Illing & Ying Liu, 2003. "An Index of Financial Stress for Canada," Working Papers 03-14, Bank of Canada.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:bca:bocawp:00-4. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.