Is the Canadian Dollar in Secular Decline? Empirical Evidence on Purchasing Power Parity and the Links Between Exchange Rate Volatility, Transborder Capital Flows, and News
Bibliographic record
Abstract
The slump of the Canadian Dollar against the U.S. Dollar over the last years has led many observers to speculate that the Canadian Dollar is in secular decline, prompting demands for a U.S.-dollarization or even a common currency for North America. However, there is no robust empirical evidence to support the notion of a ‘secular ’ decline. An econometric model of the nominal USD/CAD exchange rate finds instead that the purchasing-power-parity adjustment mechanism is alive and well, but that the Canadian Dollar remains sensitive to commodity-price shocks. Recent years have also witnessed a startling increase in the volatility of the Canadian Dollar. This paper shows that this increase in volatility can be linked to an increase in the volume of cross-border capital flows. There is also an asymmetry through which “bad news ” about the Canadian Dollar (i.e., depreciation shocks) lead to larger innovations to volatility than good news, and there is evidence that volatility persistence has increased in the 1990s relative to earlier decades. Keywords: canadian dollar; exchange rates; purchasing power parity; financial asset volatility; capital flows; time series econometrics
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How this classification was reachedexpand
Full frame machine prediction
Teacher imitationNot calibrated prevalence, not ground truth. Human validation pending. The Gemma side is a direct model label for every work in the frame, read from the title-only record. The Codex side is a classifier learned from the 10,348 direct Codex labels and calibrated to design-weighted sample rates; fields without enough sample support carry no Codex call. Candidate is the union of the two sides; consensus is their intersection. These outputs are machine_predicted_unvalidated and are not human labels.
Distilled classifier scores by category (both heads)
| Category | Codex | Gemma |
|---|---|---|
| Metaresearch | 0.001 | 0.010 |
| Meta-epidemiology (narrow) | 0.000 | 0.000 |
| Meta-epidemiology (broad) | 0.000 | 0.000 |
| Bibliometrics | 0.002 | 0.007 |
| Science and technology studies | 0.002 | 0.002 |
| Scholarly communication | 0.003 | 0.001 |
| Open science | 0.000 | 0.001 |
| Research integrity | 0.001 | 0.001 |
| Insufficient payload (model declined to judge) | 0.007 | 0.000 |
Machine scores (provisional)
The two teacher heads of the student model, read on this work. A score orders the frame for review; it never asserts a category, and the validation status ships verbatim with every row.
Baseline scores from an immature model (maturity gate not passed, 7 training rounds). Scores rank; they never assert a category.
score_only:v0-immature-baseline · verbatim from the scoring run: score_only means the number may rank works, and no category label ships from itClassification
machine, unvalidatedMachine predicted; a candidate call from one source (direct Gemma or distilled Codex), not a consensus.
How this classification was reached, model by model and score by score, is at the end of the page under "How this classification was reached".