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Assessing Labour Market Slack for Monetary Policy

Author

Listed:
  • Erik Ens
  • Laurence Savoie-Chabot
  • Kurt See
  • Shu Lin Wee

Abstract

We assess how rising exports of US liquefied natural gas (LNG) affect the convergence of natural gas prices worldwide. Using standard principal component analysis and cointegrating techniques, we show that the degree of co-movement between global benchmark prices for natural gas has strengthened since the United States began the large-scale export of LNG in 2016. At the same time, we find that global natural gas prices do not yet adhere to the relative law of one price. Our results also suggest that issues related to storage access in Alberta between 2017 and 2019 have limited price co-movements between major benchmarks for natural gas in the United States and Canada. In addition, we use vector error correction models to show that natural gas prices in Europe and Asia respond negatively to increased exports of US LNG. These results may have implications for the development of future LNG export capacity in Canada.

Suggested Citation

  • Erik Ens & Laurence Savoie-Chabot & Kurt See & Shu Lin Wee, 2021. "Assessing Labour Market Slack for Monetary Policy," Discussion Papers 2021-15, Bank of Canada.
    • Handle: RePEc:bca:bocadp:21-15
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    File URL: https://www.bankofcanada.ca/2021/10/staff-discussion-paper-2021-15/
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    Citations

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    Cited by:

    1. Jacques Sapir, 2023. "The Macroeconomic Impact of the New Geopolitical Deal on the French Economy," Studies on Russian Economic Development, Springer, vol. 34(3), pages 308-319, June.
    2. Cars Hommes & Mario He & Sebastian Poledna & Melissa Siqueira & Yang Zhang, 2022. "CANVAS: A Canadian Behavioral Agent-Based Model," Staff Working Papers 22-51, Bank of Canada.

    More about this item

    Keywords

    Business fluctuations and cycles; Coronavirus disease (COVID-19); Econometric and statistical methods; Labour markets; Monetary policy;
    All these keywords.

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers

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