Economic Analysis on the Country

Economic Analysis on the Country Canada

A key obstacle for monetary policies is to recognize and be aware of the developments in the world economy that might have a major pressure on economic activity and inflation in Canada. In light of the current global economic crisis, initiatives in 2009 are geared towards getting a better understanding of real-financial linkages in our econometric models, refining our forecasting models for major economies, improving our knowledge of commodity markets, and examining the exchange rate and its implications for monetary policy (Highlights of Medium-term Policy Relevant Research: Update 2009, 2010).

Productivity has grown strongly in both Canada and the United States from the mid-1990s to the early 2000s. Because of a cyclical upswing and the boom in information and communications technology (ICT), productivity growth in Canada has consequently faltered. The reasons for this slowdown is likely to be because of the cyclical downturn, smaller benefits from ICT adjustment costs associated with large relative price movements, a relatively weak demand for innovation, and disincentives associated with the limited size and density of domestic markets for non-tradables. Prospects for renewed convergence to U.S. productivity growth may be related to economic structure as well as to convergence pressures and diminishing adjustment costs (Highlights of Medium-term Policy Relevant Research: Update 2009, 2010).

The worth of the Canadian dollar is comparative to other national currencies and plays a very important part in both the political and economic life of the nation as a whole. When financial entities report the Canadian dollar has gone up or down, they are referring to changes in the dollar's exchange rate which is also known as the foreign exchange rate, the forex rate, or the FX rate. An exchange rate is basically the rate at which one national currency may be exchanged for another. It is a way to measure the value or price of one currency in contrast to another (Makarenko, 2007).

Canada's framework for trade and investment policy based on shared federal-provincial competencies, and includes an agreement to identify and reduce interprovincial barriers to trade and investment, as internal barriers distort resource allocation. When looking at the importance of trade and foreign direct investment in the economy, Canada's stated policy is to sustain open markets and grant foreign companies national treatment, while securing access to foreign markets for Canadian firms (Trade policy regime: framework and objectives, 2007).