The Turning Black Tide: Energy Prices and the Canadian Dollar

The authors revisit the relationship between energy prices and the Canadian dollar in the Amano and van Norden (1995) equation, which shows a negative relationship such that higher real energy prices lead to a depreciation of the Canadian dollar. Based on structural break tests, the authors find a break point in the sign of this relationship, which changes from negative to positive in the early 1990s. The break in the effect between energy prices and the Canadian dollar is consistent with major changes in energy-related cross-border trade and in Canada's energy policies.

Published In:

Canadian Journal of Economics (0008-4085)
August 2008. Vol. 41, Iss. 3, pp. 737-59