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Does the Canadian economy suffer from Dutch Disease?

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  • Michel Beine
  • Charles Bos
  • Serge Coulombe

    ()
    (CREA, University of Luxembourg)

Abstract

We argue that the failure to disentangle the evolution of the Canadian currency and energy and commodity prices from the US currency leads to potential wrong conclusions regarding the case of a Dutch disease in Canada. We propose a new approach aimed at extracting currency components and energy and commodity prices components from observed exchange rates and prices. Then, we analyze first the separate influence of commodity prices on the Canadian and the US currency component. Second, we estimate the separate impact of the two currency components on the shares of manufacturing employment in Canada. We show that 54 percent of the manufacturing employment loss due to exchange rate development between 2002 and 2007 are related to a Dutch disease phenomenon. The remaining 46 percent can be ascribed to the weakness of the US currency.

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Paper provided by Center for Research in Economic Analysis, University of Luxembourg in its series CREA Discussion Paper Series with number 09-06.

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Date of creation: 2009
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Handle: RePEc:luc:wpaper:09-06

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Cited by:
  1. Michel Beine & Serge Coulombe & Wessel N. Vermeulen, 2012. "Dutch Disease and the Mitigation Effect of Migration: Evidence from Canadian Provinces," CESifo Working Paper Series 3813, CESifo Group Munich.
  2. Elissaios Papyrakis & Ohad Raveh, 2013. "An Empirical Analysis of a Regional Dutch Disease: The case of Canada," OxCarre Working Papers, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford 106, Oxford Centre for the Analysis of Resource Rich Economies, University of Oxford.
  3. Harding, Torfinn & Venables, Anthony J, 2013. "The implications of natural resource exports for non-resource trade," CEPR Discussion Papers, C.E.P.R. Discussion Papers 9318, C.E.P.R. Discussion Papers.
  4. Dungey, Mardi & Fry-McKibbin, Renée & Linehan, Verity, 2013. "Chinese resource demand and the natural resource supplier," Working Papers, University of Tasmania, School of Economics and Finance 17027, University of Tasmania, School of Economics and Finance, revised 01 Jul 2013.
  5. Brown, Jason, 2014. "Production of natural gas from shale in local economies: a resource blessing or curse?," Economic Review, Federal Reserve Bank of Kansas City, issue Q I, pages 1-29.
  6. Wessel N. Vermeulen, 2011. "External income, De-industrialisation and Labour Mobility," CREA Discussion Paper Series 11-20, Center for Research in Economic Analysis, University of Luxembourg.
  7. João Sousa Andrade & António Portugal Duarte, 2013. "The Dutch Disease in the Portuguese Economy," GEMF Working Papers 2013-05, GEMF - Faculdade de Economia, Universidade de Coimbra.
  8. Wessel N. Vermeulen, 2013. "Resource Income and the Effect on Domestic Neighbours: A case study on Canadian Provinces," CREA Discussion Paper Series 13-05, Center for Research in Economic Analysis, University of Luxembourg.
  9. Weber, Jeremy G., 2013. "A Decade of Natural Gas Development: The Makings of a Resource Curse?," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C., Agricultural and Applied Economics Association 150407, Agricultural and Applied Economics Association.

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