The Loonie’s Flirtation with Parity: Prospects and Policy Implications
AbstractWith the Canadian dollar near parity with its US counterpart, monetary policymakers may come under pressure to curb future interest rate increases to limit the loonie’s appreciation. When the value of the loonie is in line with economic fundamentals, such actions would necessarily compromise the domestic inflation target. By examining the factors underpinning the Canada/US exchange rate, we conclude that the present trading range for the loonie is supported by fundamentals. The Bank of Canada should therefore continue its policy of benign neglect with regard to the exchange rate.
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Bibliographic InfoPaper provided by C.D. Howe Institute in its series e-briefs with number 101.
Length: 7 pages
Date of creation: Jun 2010
Date of revision:
Publication status: Published on the C.D. Howe Institute website, June 2010
Monitary Policy; Bank of Canada; exchange rate;
Find related papers by JEL classification:
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- F31 - International Economics - - International Finance - - - Foreign Exchange
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-08-06 (All new papers)
- NEP-CBA-2010-08-06 (Central Banking)
- NEP-MAC-2010-08-06 (Macroeconomics)
- NEP-MON-2010-08-06 (Monetary Economics)
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