By 2015, Canada is the world 's eleventh-largest economy with a normal GDP close to US $1.79 trillion. High-resources and trade-depended are the major factors in Canada’s economy. Canada had a good performance in stabilizing economy growth. Canada adopted a floating exchange rate for 42 out of the last 50 years. (6)During the past several years, the topic of Canadian Government is that if they should continue a floating exchange rate or retook a fixed exchange rate.
Exchange rate presents a rate that one currency can be exchanged to another, and it can be divided into fixed exchange rate and floating exchange rate. Fixed exchange rate is set by central bank and maintained as official exchange rate. It can be only moved within a very small range. Floating exchange rate is determined by demand and supply in the private market, and it also can be fluctuated based on the value of currency. Many countries used fixed exchange rate under the Bretton Woods System to maintain a stable exchange rate with a
U.S. takes 75 percent of the Canada’s total export, and the whole export accounts for 40 percent of Canada’s GDP. By analyzing data from Bank of Canada, the average exchange rate (CAD/USD) is 0.7648 in October 2015, and October’s number is higher than the previous two months, which are 0.7595 and 0.7538 (出处according to the “Trading Economics”) Moreover, Canada’s trade gap was enlarged from 2.32 billion to 2.76 from previous two months to October 2015. The total export was dropped by 1.8% and the main reason was lost a sale of 2.8% from the United Stated trading. Trace back to 2013, Canada’s exchange rate (CAD/USD) was 0.9977. We assume that if Canada undertook the fixed exchange rate at 0.9977, and executed the rate during depression, the situation of deficit would be even worse. So floating exchange rate helps economy to adjust disequilibrium in the balance of payment when the global market gets into a
Canada and the United States are the largest trade partners in the world. It is the result of the geographical position of two countries and the free trade between two countries. It should be a great thing for the economies of both countries, but since the North American Free Trade Agreement was signed, American businesses almost took over the Canadian economy. When the American companies started to make more business in Canada, it brought more jobs and money to the country in the short-term. But as a long-term effect Canadians became even more depended on the U.S. as the American companies started dominating Canadian companies in Canada. Also, today Canadian manufacturers have little protection from the government when ch...
The global economy has been recovering from the financial crisis which occurs in 2008, then has a weak growth for most developed countries over 2012 and 2013. But economic activity in Canada has expanded at a faster pace than most other major advanced countries in 2012; however, economic performance in Canada has been unsteady throughout 2013 (The Economic review, 2013). After the last quarter in 2010 GDP growth rate grows rapidly, the GDP grows slowly but steadily in 2012 which remains at around 3 percent. Real GDP growth rate in Canada grows slowly in the first quarter of 2013, but increased by 5 percent in the second quarter ,then remains the same level until the first quarter of 2014 (Statistics Canada, 2014). In 2014, the Canadian government take a series economic action plan as a guide for the economy development such as improving investment conditions, ...
This constant income has proven to support our economy by more than just improving life quality. Canada’s three main exports also allow Canada to keep a more balanced budget. With an extensive amount of money being put into importing goods from other countries, exporting gives Canada a fighting chance against the terrible trag...
The Canada-U.S. trade relationship is not static. Political and business strategies and practices change on both sides of the border, and events occur such as "mad cow disease" that are beyond almost everyone's control.
...nguage, and religion all make up Canada’s human face, but also front how the cultural accommodation will continue with the risk of losing Canada’s main traditions. Faultlines again come into perspective within demographic issues, especially with newcomers/old-timers, aboriginal population expansions, and French/English language. The core/periphery model is also represented. The end of the chapter places a focus on Canada’s economic face as well, dealing with stresses inside the global economy as well as its strong dependency on the U.S markets (Bone, 169) especially with the stimulating global recession. Canada’s economic structure leans on the relative share of activity in the primary (natural resource extraction), secondary (raw material assembly), tertiary (sale/exchange of goods and services), and quaternary (decision-making) sectors of the economy (Bone, 166).
Canada becomes dependent on United States as Canada's source of economy. The United States is Canada's largest trading partner; this is a concern because close relationship between the economy trades of two countries resembles a double edged sword. Although Canada's economy will become more powerful when United State's economy becomes powerful, there is always a chance of the opposite results occurring. (Kimberly, 2015)
So when the dollar is depreciating, the exchange rate becomes smaller. Exchange rate (foreign exchange rate, forex rate or FX rate) is the number of units of a given currency that can be purchased for one unit of another currency. The United States capital markets are becoming more attractive to foreign investors. Since the dollar is falling, it makes foreigner’s investment in the United States more affordable. Therefore, foreigners take this opportunity to invest in the United States.
People outside of Canada are baffled at how Canada ended up in such a state of affairs. Canada as a country has a lot going for it. A high GNP, and high per capita income in international terms. It is ranked at the top of the...
To put it simply, the exchange rate is a price. As with any other market, price is determined by supply and demand. Whenever they are not equivalent, the exchange rate would change. However, the reality comes to be far more complicated.
The end of the World War II marked the beginning of a new era for the world economy. The Bretton Woods System refers to an agreement made at an international conference between 44 nations in 1944 at Bretton Woods, New Hampshire, United States of America (hereby U.S.) on the 22nd of July 1944. It was aimed at maintaining stability in the monetary system in the post World War II period. “In an effort to free international trade and fund postwar reconstruction the member states agreed to fix their exchange rates by tying their currencies to the U.S. dollar.” The fundamental of this system was liberalizing trade policy and promoting free trade. The U.S. dollar was linked to gold as a show of its dependability in the eyes of the rest of the world, $35 equaled 1 ounce of gold. They followed an adjustable fixed exchange rate (1% band). It set up the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD), which is a part of the World Bank today. Member nations monetary contributions to the setting up of these institutes determined their number of votes as well as their economic prowess
Under the linked exchange rate system, the Hong Kong dollar is linked to the U.S. dollar at the rate of HKD 7.8 to USD 1. Unlike the fixed exchange rate regime implemented in other economies, under the linked exchange rate system, the government or the de facto central bank of Hong Kong, HKMA does not actively interfere in the foreign exchange market by controlling the supply and demand of the Hong Kong dollar in order to influence the exchange rate. According to John Greenwood (2008), the linked exchange rate system is a currency board system, which requires both the stock and flow of the monetary base to be fully backed by foreign reserves. This implies that any change in the monetary base is fully matched by the corresponding change in foreign reserves at a fixed exchange rate. According to the HKMA, the monetary base of Hong Kong is made up of the following four components: 1). Certificates of Indebtedness; 2). Government-issued notes and co...
Their ease of conducting business and trading across borders ranks favorably for American consider expanding in Canada (Cubbage et al., 2010). The U.S. dollar because of its strength and purchasing power is attractive to many other countries including Canada. Imports and exports play a vital role in the attractiveness of the dollar. If a wood produced in Canada is less expensive than wood produced in the U.S. imports will escalate, and exports will plummet. These factors result in the U.S. dollar being more or less enticing to consumer and investors at various intervals. Robson & Laidler (2002) explored the possibility of Canada adopting the U.S. dollar as their official currency. They argued it reduces the cost of transactions and improves decision-making in Canada. Each government can print money based on a need to combat events such as inflation and deflation and, in turn, affect the exchange
There are other policy issues that might guide a country to change its fixed exchange rate. For example, rather than implementing unpopular fiscal spending policies, a government might try to use devaluation to boost aggregate demand in the economy in an effort to fight unemployment.
With a GDP of $1.842 trillion in 2012, India is one of the fastest growing economies (The World Bank Group). Another determinant of a country’s competiveness level is its exchange rate; the Indian Rupee decreased to 60.92 this March from 62.10 in February 2014 per USD. The Indian Rupee averaged 32.51 since 1973, with a maximum rea...
The foreign exchange markets allow the conversion of currencies, where it helps the firms to conduct trade more efficiently across the national boundaries. In addition, firms can shop for low cost financing in capital markets all over the world and then use the foreign exchange market to convert the foreign currency that they got into whatever currency they require. With the foreign exchange nowadays, anyone can go to other country by converting their domestic currency into the foreign currency. The foreign exchange will follow the rate of exchange according to the country's rate. But still, the foreign exchange market is actually dealing with fluctuation where sometimes it has upward and downward movement.