Going Dutch? The Impact of Falling Oil Prices on the Canadian Economy

Jared Carbone and Kenneth McKenzie

Canadian Public Policy, 2016, vol. 42, issue 2, 168-180

Abstract: The steady-state impact of reductions in the price of oil is examined using a CGE model of the Canadian economy. In our base case of a 10 percent reduction in the oil price, national output declines by 1.0 percent and consumer welfare by 0.90 percent. The welfare losses are shared broadly across the provinces, most particularly Ontario, Canada's manufacturing hub. The corollary, of course, is that a positive price shock leaves Canadians better off. Sensitivity analysis suggests that the results are robust to alternative assumptions regarding key parameters, and are proportional to the magnitude and sign of the oil price shock.

Date: 2016
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