Relative Price Movements and Labour Productivity in Canada: A VAR Analysis
In recent years, the Canadian economy has been affected by strong movements in relative prices brought about by the surging costs of energy and non-energy commodities, with significant implications for the terms of trade, the exchange rate, and the allocation of resources across Canadian sectors and regions. While the energy and mining industries have benefited from these movements, the pressure on the manufacturing sector has intensified, since many firms in this sector were already dealing with growing competition from low-cost economies such as China. The adjustments undertaken within the Canadian economy are readily noticeable through investment decisions, as well as through production and employment reallocation. Using vector autoregressive techniques, the authors examine how an appreciation in commodity prices and the subsequent reallocation of resources across sectors will affect hours worked and output growth and, ultimately, aggregate and sectoral labour productivity growth in Canada. Results suggest that the impact of a positive relative price shock will – in the adjustment process – lower productivity growth in the primary and the non-tradable sectors, and increase it somewhat in the manufacturing sector. The overall impact appears to be slightly negative on aggregate labour productivity growth, but this effect is only temporary.
|Date of creation:||2010|
|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/
When requesting a correction, please mention this item's handle: RePEc:bca:bocadp:10-5. 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.