1 - 1A. In few years Canada has faced an increase in...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
1A . In few years Canada has faced an increase in economy with lower valued dollar. However lately we have seen that Canadian dollar has gone up in market due to many factors. Canadian loonies soured to heights due to the monetary policy that are used at market. Tight monetary policy controls and raises Canadian interest rates and attracts more capital flows into Canada. (Brean, 53) Monetary policy impacts inflation rate that influence rate of Canadian dollar. When inflation rate, which is the annual percentage change of the price level, is lower relatively to other countries it contributes the flow of investment money into Canada. It will increase demand for Canadian dollar and the pressure on the value of it. (Parkin and Bade, 498; Brean, 53 – 55) Investment from foreign investors in Canada brings up Canadian dollars. When they buy stocks bonds, invest in business or purchase Canadian goods they must get Canadian dollars from currency market. Increase in investments brings up demand for Canadian Dollar, where exchange rate influences it.(Brean, 53) Exchange rate boosted up Canadian dollars. Foreigners buy Canadian securities in foreign exchange market. Those securities are paid in Canadian dollars which means Canadian dollars must be bought first. Exchange rate increases due to international “buy pressure” on Canadian dollar, and so does the demand for it. More costly Canadian dollar makes imports less expensive for Canadians and costly for foreign consumers. (Brean, 53) Last but not the least increase in demand for Canadian goods brought up the value of Canadian dollar. When oil reached its peak, Canada was one of the countries that benefited. Rich with natural resources and with high demands for it, Canadian
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
exports dramatically increased to United States and other high developed countries. It increased demand for Canadian dollar and went up from US$0.62 per Canadian dollar to US$0.92 in June 2006. (Brean, 42) The negative growth of net exports had a dampening effect on the Canadian economy and rising value of the Canadian dollar. Canadian dollar went up to 40% in terms of the U.S. dollar between 2004 – 2006, which significantly squeezed Canadian exports while making imports cheaper. (Brean, 45) 1B . The Bank of Canada and the federal government have a huge influence on Canada’s economy. The Bank of Canada controls the supply of money and other transactions such as government investments. However, there are different factors that the Bank of Canada and the federal government contribute to influence the rising value of Canadian dollar. The Bank of Canada tends to control monetary policy in order to increase or sustain stable value of Canadian dollar. In particular, they tighten monetary policy and decrease money supply growth to increase interest rate, to obtain decrease in price which is inflation and appreciation of the Canadian dollar. John Crow, minister of finance and The Bank of Canada brought policy “the status Crow” which applied to their goal to keep
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/09/2010 for the course LAPS ADMS 1010 taught by Professor D.jurkowski during the Winter '10 term at York University.

Page1 / 13

1 - 1A. In few years Canada has faced an increase in...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online