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If you could have a CAD that was "overpriced" and stable in PPP terms over each of the next 100 years, or underpriced and stable, which would you pick?

Export industries with low import components would prefer underpriced of course, but it seems to me that for everyone else (in Canada) an overpriced CAD would be beneficial to their standard of living.

It always amuses me, amazes me, and saddens me that there are politicians who put actually prefer something besides a strong currency. Public choice rears its ugly head once again.

These are certainly hard questions, and Ontario's premier is certainly not helping in resolving any.

I would add that the rise of natural resources prices, and the associated appreciation of the CAD against the USD, have strenghtened the terms of trade. This makes all imported intermediate goods entering the production process cheaper. If this is seen as a permanent change in the structure of FX rates, this is equivalent to an increase in productivity.

This effect may also lead to substantial change in the structure of production as manufacturers increase the import-content of output. This lasting effect may also justify why the Bank of Canada looks timid compared to current measure of output gap.

Are you still indulging that silly little science called Econometrics?

That's what we call 'eyeball econometrics'.

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