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Going Dutch? The Impact of Falling Oil Prices on the Canadian Economy

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  • Jared C. Carbone
  • Kenneth J. McKenzie

Abstract

The steady-state impact of reductions in the price of oil is examined using a CGE model of the Canadian economy. In our base case of a 10 percent reduction in the oil price, national output declines by 1.0 percent and consumer welfare by 0.90 percent. The welfare losses are shared broadly across the provinces, most particularly Ontario, Canada's manufacturing hub. The corollary, of course, is that a positive price shock leaves Canadians better off. Sensitivity analysis suggests that the results are robust to alternative assumptions regarding key parameters, and are proportional to the magnitude and sign of the oil price shock.

Suggested Citation

  • Jared C. Carbone & Kenneth J. McKenzie, 2016. "Going Dutch? The Impact of Falling Oil Prices on the Canadian Economy," Canadian Public Policy, University of Toronto Press, vol. 42(2), pages 168-180, June.
    • Handle: RePEc:cpp:issued:v:42:y:2016:i:2:p:168-180
    DOI: 10.3138/cpp.2015-045
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    Cited by:

    1. Brian R. Copeland & M. Scott Taylor, 2017. "Environmental and resource economics: A Canadian retrospective," Canadian Journal of Economics, Canadian Economics Association, vol. 50(5), pages 1381-1413, December.
    2. Razek, Noha H.A. & McQuinn, Brian, 2021. "Saudi Arabia's currency misalignment and international competitiveness, accounting for geopolitical risks and the super-contango oil market," Resources Policy, Elsevier, vol. 72(C).
    3. Grant Mark Nülle & Graham A. Davis, 2018. "Neither Dutch nor disease?—natural resource booms in theory and empirics," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 31(1), pages 35-59, May.
    4. Juste Somé, 2023. "Oil Demand and Supply Shocks in Canada’s Economy," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 21(2), pages 363-394, June.
    5. Brian R. Copeland & M. Scott Taylor, 2017. "Environmental and resource economics: A Canadian retrospective," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 50(5), pages 1381-1413, December.
    6. Vatsa, Puneet & Hu, Baiding, 2021. "Intra-federal effects of oil prices: Evidence from Canada," Resources Policy, Elsevier, vol. 74(C).
    7. G. Kent Fellows & Trevor Tombe, 2018. "Opening Canada’s North: A Study of Trade Costs in the Territories," SPP Research Papers, The School of Public Policy, University of Calgary, vol. 11(17), June.

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