Weakness in Non-Commodity Exports: Demand versus Supply Factors

José Dorich, Vadym Lepetyuk and Jonathan Swarbrick

No 2018-28, Staff Analytical Notes from Bank of Canada

Abstract: We use the Terms-of-Trade Economic Model (ToTEM) to conduct demand- and supply-driven simulations, both of which deliver weakness in Canadian non-commodity exports relative to foreign activity in line with recent data. We then compare the predictions of the simulations with observed outcomes to shed light on the source of weakness in non-commodity exports. Our results suggest that demand factors, such as competitiveness challenges, likely play a dominant role in explaining the recent weakness in non-commodity exports. The simulations also reveal that a monetary policy response is required, independent of the source of the weakness in non-commodity exports.

Keywords: International topics; Monetary Policy; Recent economic and financial developments; Trade Integration (search for similar items in EconPapers)
JEL-codes: E52 F10 F14 F17 (search for similar items in EconPapers)
Pages: 12 pages
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocsan:18-28

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