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Archive for 'exchange rates'

Dutch Disease, Prices and Wages in Saskatchewan

Jim Stanford recently pointed out that many of the conservative economists who had defended the overvalued loonie have quickly shifted to applauding its depreciation. The Government of Saskatchewan may be making a similar conversion on the road to Damascus. When federal NDP leader Tom Mulcair expressed concern about Dutch disease, premier Brad Wall denied that […]

The Odd Conversion of Mainstream Economists to the Virtues of Depreciation

The long-overdue depreciation of Canada’s currency is gathering steam. The dollar lost 8 cents against its U.S. counterpart, in fits and starts, over 2013. It’s lost another 2 cents since the start of 2014, and negative sentiment about the currency is accumulating among financial analysts and traders. Indeed, once the expectation that the loonie will […]

Saskatchewan Budget Saved by Falling Loonie

Following last week’s troubling news about potash, the Saskatchewan government released its first-quarter financial report today. The headline seems to be “Oil Keeps Budget in Black”, with a forecast increase in oil revenue more than offsetting a forecast decline in potash and other revenues. But the forecast West Texas Intermediate price is only up by […]

Industrial Policy, Manufacturing Employment, and the Loonie

The Institute for Research on Public Policy has published a very interesting overview study on the resuscitation of “industrial policy” in economic policy circles.  It points out that industrial policy levers are used widely by countries around the world–despite hypothetical efforts (through trade deals and other institutions) to limit their application. 

Dutch Disease is Dead … Long Live Dutch Disease!!!

In the hyper-polarized context of Canadian energy policy debates, even suggesting that there might be a downside to the untrammeled energy boom centred in northern Alberta is enough to get you labelled a traitor or an economic illiterate — or both.  Conservative political leaders in both Ottawa and Edmonton, backed by energy-friendly think-tanks and the […]

The IMF and the Canadian Manufacturing Crisis

A background study for the latest IMF report on Canada (see pages 42 to 51) adds further weight to the argument that the rise in the exchange rate of the Canadian dollar, driven in large part by high commodity prices, has underpinned a sharp decline in the US market share of Canadian manufacturers since 2000 […]

Exchange Rates, the Price of Oil and the Enbridge Northern Gateway Project Joint Review Panel

This is a guest post by Paul Tulloch, of LivingWork.ca and frequent commentator on this blog, reporting on some  significant and timely work he prepared for the northern gateway pipeline review panel, analyzing correlations betwen the price of oil and the Canadian dollar. Exchange Rates, the Price of Oil and the Enbridge Northern Gateway Project Joint Review Panel […]

Oil Prices and the Loonie Again

There’s a refreshingly pragmatic and detailed piece in today’s National Post by Peter Spiro questioning the assumed correlation between oil prices and the loonie.  It builds nicely on previous discussion of the “oil price-loonie transmission mechanism” that has occurred here and here. Among other salient points, Mr. Spiro points out that: Canadian petroleum exports have […]

Spinning Mr. Carney

For novelty value if nothing else, Mark Carney’s appearance at the CAW convention last week was bound to spark lots of attention.  After all, we could find no other historical example of a Bank of Canada Governor ever speaking to a union convention.  That says something in and of itself, of course.  Central bankers speak […]

Broadening the Bank of Canada’s Mandate

Yesterday, Mike Moffatt took to The Globe and Mail’s “Economy Lab” in response to my suggestion that the Bank of Canada should moderate the exchange rate. (Perhaps his motive for encouraging me to seek the Saskatchewan NDP leadership was to get me as far as possible from the levers of monetary policy.) My rebuttal of […]

Randy Hoback’s Pulp Fiction

Last week, Conservative MP Randy Hoback had another letter in The Prince Albert Daily Herald blaming the NDP for the pulp-mill closure in 2006. He still has not addressed my main point about resource royalties. I have the following response on page 4 of today’s Herald: Pulp mill saga proves Mulcair’s point Notwithstanding MP Randy […]

More on the OECD and Dutch Disease

Further to my earlier post on the OECD and “Dutch Disease”, I have received a heavily redacted response to an access to information request (A-2012-00073/CN.)  submitted to the Department of Finance, seeking any comments on the draft assessment and recommendations of the OECD delegation to Canada in 2012. This arrives just as Conservative ads attack […]

Agreeing with Hoback’s Headline

I have the following letter in today’s Prince Albert Daily Herald (page 4): Reinvest Resource Wealth in Saskatchewan To the editor: I strongly agree with the title of MP Randy Hoback’s letter: “Siphoning money out of the west is wrong” (June 9). My proposal is to keep more money in Saskatchewan by collecting more provincial […]

Dutch Disease on the Rideau

The following is another guest post by Robyn Allan: A report recently released by the Macdonald-Laurier Institute claims Canada does not suffer from the Dutch disease. Unfortunately, the studies the authors draw on for this conclusion are riddled by it. The Dutch disease is a situation where rapid export of a nation’s raw resources along […]

Debating Hoback on Resource Royalties

Prince Albert MP Randy Hoback began last week’s inquisition by objecting to my recent op-ed in The Saskatoon StarPheonix on the “Dutch disease” debate between Saskatchewan Premier Brad Wall and federal NDP leader Tom Mulcair. He then interrupted to question my NDP affiliation. As indicated in today’s Prince Albert Daily Herald (page A4), I would […]

Dutch Disease, the Canada – US Exchange Rate and Trade With Asia

Today’s Globe editorial provides further evidence of distorted economic reasoning being rolled out to attack Thomas Mulcair. “Mr. Mulcair seems to long for a golden age of manufacturing and a low dollar, but his longing won’t take Canada anywhere. Not only the dollar but Asian competition has inflicted damage on Canadian exporters.” The implication seems […]

Inflation On Target; Exchange Rate Off Target

Today, Statistics Canada reported an annual inflation rate of 2%, precisely in line with the Bank of Canada’s target. With inflation under control and renewed risks to the global economy, there is little rationale for the central bank to raise interest rates anytime soon. In fact, the Bank of Canada should now be more concerned […]

Energy McCarthyism

The high-and-mighty virtiol which greeted Tom Mulcair’s comments last week about the downside of oil-powered currency appreciation is lamentable (repeating the over-the-top reaction to Dalton McGuinty’s similar comments a few weeks ago).  Mulcair made two modest and empirically substantiated statements: the loonie is sky-high as a result of the oil boom in Alberta’s bitumen sands […]

Going to the Wall in Defence of Mulcair

I have the following op-ed in today’s Saskatoon StarPhoenix: Royalty hike cure for Dutch disease Premier Brad Wall calls federal NDP Leader Tom Mulcair “very, very divisive” for expressing concern that Canada’s overvalued petro-dollar is eliminating manufacturing jobs. In reality, Wall is being divisive by exploiting this legitimate concern to fan the flames of western […]

Canada’s Oil: For Sale to the Highest Bidder

Want to know why Canada’s currency is sky-high despite our sluggish recovery, our large and persistent current account deficit, and our lousy export performance? Check out this fascinating story in Friday’s National Post, by Yadullah Hussain, on why Canada’s oil reserves are such a uniquely hot commodity in the eyes of global oil corporations. The […]

The Oil Price-Loonie Transmission Mechanism

The most interesting comments from Bank of Canada Governor Mark Carney last week, in releasing the Bank’s semi-annual Monetary Policy Report, dealt with the relationship between the price of oil and the Canadian currency.  The Globe and Mail reported Carney as publicly questioning why currency traders automatically presume such a direct link between the loonie […]

The Economics of Deception

The following is a guest post by Robyn Allan, the former president of the Insurance Corporation of British Columbia who appeared with me on TVO’s panel about Dutch disease. It summarizes her recent paper: An Analysis of Canadian Oil Expansion Economics. There is a chorus singing the praises of the oil industry and its vast economic […]

The Current Account Deficit

The National Bank have published a very useful and interesting report on the current account deficit, which is now running at about 3% of GDP. They argue that the deficit – largely driven by a huge fall in our manufacturing and wider goods trade balance – has now become structural, and should be cause for […]

Iceland and the Loonie

Dean Baker has weighed in on the weird idea that Iceland might adopt the Canadian dollar.  It is their decision to make, but I also don’t see much to recommend it.

The Loonie’s Stagnant Purchasing Power

The following note also appears on Business Insider. I owe Paul Tulloch a hat tip for reminding me of these issues in a good comment on my last post. When Ontario’s Premier recently complained that Canada’s petro-dollar undermines manufacturing exports, many economists tripped over each other to counter that a strong loonie benefits all Canadians […]

What To Do About Dutch Disease?

In response to Ontario Premier Dalton McGuinty’s complaint about oil and the exchange rate, several (conservative) commentators argued that this “Dutch disease” is not what ails Ontario manufacturing. Andrew Coyne took a different tack yesterday, agreeing that petroleum development drives up the exchange rate to the detriment of manufacturing and hence Ontario’s economy, but concluding […]

Wageless recovery and the politics of austerity

The UNTCAD just published its annual report on Trade and Development, titled Post-crisis Policy Challenges in the World Economy. The report describes a two speed global recovery, showing how developing economies have come out of the crisis stronger then their developed European and American counterparts. There the author invokes the contradictory forces at work in […]

Professors’ Salaries

Yesterday, Alex Usher blogged at the Globe and Mail’s web site about the salaries of Canadian university professors. He argues that professors in Canada are now paid better than professors in the United States. He also suggests that, in Canada, “professors are getting world-class pay without producing world-class results.” While I’ve never argued that tenured […]

Japan Shows Us The Way

A week ago, Paul Krugman wrote that Japan’s stable if sluggish economy and low unemployment could start looking pretty good compared to the Voodoo economics advocated by US Republicans. The counterintuitive case for Japan as an economic model just became more compelling with the Bank of Japan’s intervention to lower the yen. As reported on […]

Where’s the Inflation Threat?

Earlier this month, the Bank of Canada raised interest rates ahead of its original schedule to head off inflation. Some commentators are calling for further rate hikes in the near future. But today’s Consumer Price Index suggests that inflation is not an impending threat. Adjusting for seasonal factors, consumer prices were lower in May than […]