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Weakness in Non-Commodity Exports: Demand versus Supply Factors

Author

Listed:
  • José Dorich
  • Vadym Lepetyuk
  • Jonathan Swarbrick

Abstract

We use the Terms-of-Trade Economic Model (ToTEM) to conduct demand- and supply-driven simulations, both of which deliver weakness in Canadian non-commodity exports relative to foreign activity in line with recent data. We then compare the predictions of the simulations with observed outcomes to shed light on the source of weakness in non-commodity exports. Our results suggest that demand factors, such as competitiveness challenges, likely play a dominant role in explaining the recent weakness in non-commodity exports. The simulations also reveal that a monetary policy response is required, independent of the source of the weakness in non-commodity exports.

Suggested Citation

  • José Dorich & Vadym Lepetyuk & Jonathan Swarbrick, 2018. "Weakness in Non-Commodity Exports: Demand versus Supply Factors," Staff Analytical Notes 2018-28, Bank of Canada.
    • Handle: RePEc:bca:bocsan:18-28
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    References listed on IDEAS

    as
    1. André Binette & Tony Chernis & Daniel de Munnik, 2017. "Global Real Activity for Canadian Exports: GRACE," Discussion Papers 17-2, Bank of Canada.
    2. Nicholas Labelle, 2018. "Decomposing Canada’s Market Shares: An Update," Staff Analytical Notes 2018-26, Bank of Canada.
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    Cited by:

    1. Paul Corrigan & Hélène Desgagnés & José Dorich & Vadym Lepetyuk & Wataru Miyamoto & Yang Zhang, 2021. "ToTEM III: The Bank of Canada’s Main DSGE Model for Projection and Policy Analysis," Technical Reports 119, Bank of Canada.
    2. Dany Brouillette & José Dorich & Chris D'Souza & Adrienne Gagnon & Claudia Godbout, 2018. "What Is Restraining Non-Energy Export Growth?," Staff Analytical Notes 2018-25, Bank of Canada.

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    More about this item

    Keywords

    International topics; Monetary Policy; Recent economic and financial developments; Trade Integration;
    All these keywords.

    JEL classification:

    • F10 - International Economics - - Trade - - - General
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F17 - International Economics - - Trade - - - Trade Forecasting and Simulation
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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