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Energy, the Exchange Rate, and the Economy: Macroeconomic Benefits of Canada’s Oil Sands Production

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  • Mr. Tamim Bayoumi
  • Mr. Martin Mühleisen

Abstract

This paper describes potential benefits from Canada's expanding oil sands production, higher energy exports, and further improvements in the terms of trade. Contrary to the previous Canadian exchange rate literature, this paper finds that both energy and nonenergy commodity prices have an influence on the Canadian dollar, and some upward pressure on the exchange rate would therefore be expected. Model results suggest, however, that the impact on other tradable goods exports is limited.

Suggested Citation

  • Mr. Tamim Bayoumi & Mr. Martin Mühleisen, 2006. "Energy, the Exchange Rate, and the Economy: Macroeconomic Benefits of Canada’s Oil Sands Production," IMF Working Papers 2006/070, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2006/070
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    File URL: http://www.imf.org/external/pubs/cat/longres.aspx?sk=18917
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    References listed on IDEAS

    as
    1. Douglas B. Reynolds, 2005. "The economics of oil definitions: the case of Canada's oil sands," OPEC Energy Review, Organization of the Petroleum Exporting Countries, vol. 29(1), pages 51-73, March.
    2. Corden, W M, 1981. "The Exchange Rate, Monetary Policy and North Sea Oil: The Economic Theory of the Squeeze on Tradeables," Oxford Economic Papers, Oxford University Press, vol. 33(0), pages 23-46, Supplemen.
    3. International Monetary Fund, 2004. "Canada: Selected Issues," IMF Staff Country Reports 2004/060, International Monetary Fund.
    4. Laxton, Douglas & Pesenti, Paolo, 2003. "Monetary rules for small, open, emerging economies," Journal of Monetary Economics, Elsevier, vol. 50(5), pages 1109-1146, July.
    5. Maurice Obstfeld & Kenneth Rogoff, 2001. "The Six Major Puzzles in International Macroeconomics: Is There a Common Cause?," NBER Chapters, in: NBER Macroeconomics Annual 2000, Volume 15, pages 339-412, National Bureau of Economic Research, Inc.
    6. Mr. Jaewoo Lee & Mr. Hamid Faruqee & Mr. Tamim Bayoumi, 2005. "A Fair Exchange? Theory and Practice of Calculating Equilibrium Exchange Rates," IMF Working Papers 2005/229, International Monetary Fund.
    7. Jeannine Bailliu & Michael R. King, 2005. "What Drives Movements in Exchange Rates?," Bank of Canada Review, Bank of Canada, vol. 2005(Autumn), pages 27-39.
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    Cited by:

    1. Beine, Michel & Bos, Charles S. & Coulombe, Serge, 2012. "Does the Canadian economy suffer from Dutch disease?," Resource and Energy Economics, Elsevier, vol. 34(4), pages 468-492.
    2. Mr. Itai Agur, 2016. "Products and Provinces: A Disaggregated Panel Analysis of Canada’s Manufacturing Exports," IMF Working Papers 2016/193, International Monetary Fund.
    3. International Monetary Fund, 2013. "Canada: Selected Issues," IMF Staff Country Reports 2013/041, International Monetary Fund.
    4. Michael-John Almon & Jianmin Tang, 2011. "Industrial Structural Change and the Post-2000 Output and Productivity Growth Slowdown: A Canada-U.S. Comparison," International Productivity Monitor, Centre for the Study of Living Standards, vol. 22, pages 44-81, Fall.

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    Keywords

    WP; exchange rate; commodity; export;
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