Assessing Labour Market Slack for Monetary Policy

Erik Ens, Laurence Savoie-Chabot, Kurt See and Shu Wee

No 2021-15, Discussion Papers from Bank of Canada

Abstract: We assess how rising exports of US liquefied natural gas (LNG) affect the convergence of natural gas prices worldwide. Using standard principal component analysis and cointegrating techniques, we show that the degree of co-movement between global benchmark prices for natural gas has strengthened since the United States began the large-scale export of LNG in 2016. At the same time, we find that global natural gas prices do not yet adhere to the relative law of one price. Our results also suggest that issues related to storage access in Alberta between 2017 and 2019 have limited price co-movements between major benchmarks for natural gas in the United States and Canada. In addition, we use vector error correction models to show that natural gas prices in Europe and Asia respond negatively to increased exports of US LNG. These results may have implications for the development of future LNG export capacity in Canada.

Keywords: Business fluctuations and cycles; Coronavirus disease (COVID-19); Econometric and statistical methods; Labour markets, Monetary policy (search for similar items in EconPapers)
JEL-codes: E24 J21 J6 (search for similar items in EconPapers)
Date: 2021-10
New Economics Papers: this item is included in nep-ene, nep-lma, nep-mac and nep-mon
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Citations: View citations in EconPapers (2)

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