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The turning black tide: energy prices and the Canadian dollar

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  • Ramzi Issa
  • Robert Lafrance
  • John Murray

Abstract

. This paper revisits the relationship between energy prices and the Canadian dollar, using an equation first developed by Amano and van Norden (1995). They found evidence of a negative relationship between these two variables, such that higher real energy prices led to a depreciation of the Canadian dollar. Based on structural break tests, we find a break point in the sign of this relationship, which changes from negative to positive in the early 1990s. The timing of the break is consistent with major changes in Canada's energy policies and in energy‐related cross‐border trade and investment. Les auteurs réexaminent la relation entre les prix réels de l'énergie et le dollar canadien établie par Amano et van Norden (1995), à savoir qu'une hausse de ces prix entraîne une dépréciation du dollar. D'après les tests de rupture structurelle qu'ils appliquent à l'équation d'Amano et van Norden, la relation entre les deux variables aurait changé de signe: initialement négative, elle est devenue positive au début des années 1990. Ce changement coïncide avec les assouplissements apportés à la réglementation du secteur des produits énergétiques et avec l'évolution observée des échanges et des investissements transfrontaliers dans ce secteur.

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  • Ramzi Issa & Robert Lafrance & John Murray, 2008. "The turning black tide: energy prices and the Canadian dollar," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 41(3), pages 737-759, August.
  • Handle: RePEc:wly:canjec:v:41:y:2008:i:3:p:737-759
    DOI: 10.1111/j.1540-5982.2008.00483.x
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    2. Stephen Tapp, 2011. "Lost in transition: the costs and consequences of sectoral labour adjustment," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 44(4), pages 1264-1296, November.
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    6. Mr. Itai Agur, 2016. "Products and Provinces: A Disaggregated Panel Analysis of Canada’s Manufacturing Exports," IMF Working Papers 2016/193, International Monetary Fund.
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