The Effects of Exchange Rates on Employment in Canada

Haifang Huang (), Ke Pang () and Yao Tang

No 2013-8, Working Papers from University of Alberta, Department of Economics

Abstract: Under the flexible exchange rate regime, the Canadian economy is constantly affected by fluctuations in exchange rates. This paper focuses on employment in Canada. We find that appreciations of the Canadian dollar have significant effects on employment in manufacturing industries; such effects are mostly associated with the export-weighted exchange rate and not the import-weighted exchange rate. The export-weighted exchange rate elasticity of employment is -0.52. However, we also find that exchange rate fluctuations have little impact on Canada’s nonmanufacturing employment. Because the manufacturing sector accounts for only about 10% of the employment in Canada, the overall employment effect of exchange rates is small. In addition, we assess the potential employment impact of a boom in the global commodity market, which often leads to appreciations of the Canadian dollar. We find that a 12.21% increase in commodity prices (one standard deviation in the 1994-2007 data) reduces Canada’s manufacturing employment by 0.98%, less than 0.1% of the total industrial employment.

Keywords: exchange rate; employment in Canada (search for similar items in EconPapers)
JEL-codes: F16 F31 J23 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2013-06-01, Revised 2014-04-30
New Economics Papers: this item is included in nep-mon and nep-opm
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Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Effects of Exchange Rates on Employment in Canada (2014)
Working Paper: The Effects of Exchange Rates on Employment in Canada (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:albaec:2013_008

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