Real and Monetary Shocks to the Canadian Dollar: Do Canada and the U.S Form an Optimal Currency Area?
There is widespread agreement that during the floating exchange rate period from 1970 to the present Canada's nominal and real exchange rates with respect to the United States have shown considerable volatility. It has been suggested that the volatility of the real exchange rate would be substantially reduced if the nominal exchange rate with the U.S.~dollar were fixed, either through a permanent fixed exchange rate mechanism or the adoption of a common North American Currency. In all discussions of the fixed verses floating exchange rate question, it is important to understand why real exchange rates are volatile. The sources of real exchange rate volatility are the focus of our paper. Our findings are that substantial real shocks have occurred and were an important determinant of the real exchange rate. Since our results indicate that the sources of exchange rate volatility are real, not monetary, they are unfavorable to the adoption by Canada of a common currency with the United States.
|Date of creation:||07 Dec 2001|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (416) 978-5283
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Crow, J., 1999. "Any Sense in a Canadian Dollar?," Papers 99-1(a), California Davis - Institute of Governmental Affairs.
- Dornbusch, Rudiger, 1976.
" The Theory of Flexible Exchange Rate Regimes and Macroeconomic Policy,"
Scandinavian Journal of Economics,
Wiley Blackwell, vol. 78(2), pages 255-75.
- R. Dornbusch, 1975. "The Theory of Flexible Exchange Rate Regimes and Macroeconomic Policy," Working papers 165, Massachusetts Institute of Technology (MIT), Department of Economics.
- repec:fth:caldav:99-1(a is not listed on IDEAS
- Marianne Baxter & Alan C. Stockman, 1988.
"Business Cycles and the Exchange Rate System: Some International Evidence,"
NBER Working Papers
2689, National Bureau of Economic Research, Inc.
- Baxter, M. & Stockman, A.C., 1988. "Business Cycles And The Exchange Rate System: Some International Evidence," RCER Working Papers 140, University of Rochester - Center for Economic Research (RCER).
- Bela Balassa, 1964. "The Purchasing-Power Parity Doctrine: A Reappraisal," Journal of Political Economy, University of Chicago Press, vol. 72, pages 584.
- Robert P. Flood & Andrew K. Rose, 1993.
"Fixing Exchange Rates: A Virtual Quest for Fundamentals,"
NBER Working Papers
4503, National Bureau of Economic Research, Inc.
- Flood, Robert P. & Rose, Andrew K., 1995. "Fixing exchange rates A virtual quest for fundamentals," Journal of Monetary Economics, Elsevier, vol. 36(1), pages 3-37, August.
- Flood, R.P. & Rose, A.K., 1992. "Fixing Exchange Rates: A Virtual Quest for Fundamentals," Papers 529, Stockholm - International Economic Studies.
- Flood, Robert P & Rose, Andrew K, 1993. "Fixing Exchange Rates: A Virtual Quest for Fundamentals," CEPR Discussion Papers 838, C.E.P.R. Discussion Papers.
- Bayoumi, T. & Eichengreen, B., 1994. "One Money or Many? Analysing the Prospects for Monetary Unification in Various Parts of the World," Princeton Studies in International Economics 76, International Economics Section, Departement of Economics Princeton University,.
- Stockman, Alan C., 1999. "Choosing an exchange-rate system," Journal of Banking & Finance, Elsevier, vol. 23(10), pages 1483-1498, October.
- Grubel, Herbert G., 2000. "The merit of a Canada-US monetary union," The North American Journal of Economics and Finance, Elsevier, vol. 11(1), pages 19-40, August.
- Courchene, Thomas J. & Harris, Richard G., 2000. "North American Monetary Union: analytical principles and operational guidelines," The North American Journal of Economics and Finance, Elsevier, vol. 11(1), pages 3-18, August.
- Laidler, David, 1999. "The Exchange Rate Regime and Canada's Monetary Order," Working Papers 99-7, Bank of Canada.
- Michael B. Devereux, 1997. "Real Exchange Rates and Macroeconomics: Evidence and Theory," Canadian Journal of Economics, Canadian Economics Association, vol. 30(4), pages 773-808, November.
When requesting a correction, please mention this item's handle: RePEc:tor:tecipa:floyd-01-02. 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: (RePEc Maintainer)
If references are entirely missing, you can add them using this form.