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The Complex Adjustment of the Canadian Economy to Lower Commodity Prices

Author

Listed:
  • Julien Champagne
  • Nikita Perevalov
  • Hope Pioro
  • Dany Brouillette
  • Andrew Agopsowicz

Abstract

In this analytical note, we provide a comprehensive assessment of the complex structural adjustment facing the Canadian economy following the commodity price decline since mid-2014. We quantify separately the impacts coming from the commodity sector restructuring and the broader effect of significantly lower terms of trade. Based on our analysis, the impact on the Canadian economy will occur in three phases. By the end of phase 3, in 2020, the level of Canadian GDP will be 2 per cent lower due to the commodity price decline than it otherwise would have been had commodity prices stayed at the mid-2014 level. At this point, the commodity sector is expected to play a smaller role in the Canadian economy.

Suggested Citation

  • Julien Champagne & Nikita Perevalov & Hope Pioro & Dany Brouillette & Andrew Agopsowicz, 2016. "The Complex Adjustment of the Canadian Economy to Lower Commodity Prices," Staff Analytical Notes 16-1, Bank of Canada.
    • Handle: RePEc:bca:bocsan:16-1
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    References listed on IDEAS

    as
    1. José Dorich & Michael K. Johnston & Rhys R. Mendes & Stephen Murchison & Yang Zhang, 2013. "ToTEM II: An Updated Version of the Bank of Canada’s Quarterly Projection Model," Technical Reports 100, Bank of Canada.
    2. Lise Pichette & Pierre St-Amant & Ben Tomlin & Karine Anoma, 2015. "Measuring Potential Output at the Bank of Canada: The Extended Multivariate Filter and the Integrated Framework," Discussion Papers 15-1, Bank of Canada.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Business fluctuations and cycles; Exchange rates; Labour markets; Potential output; Recent economic and financial developments;
    All these keywords.

    JEL classification:

    • E17 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Forecasting and Simulation: Models and Applications
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • Q00 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - General

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