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Is a high dollar good or bad for the Canadian economy? Are investors affected differently from consumers because of this?

  • High compared with what? – mbhunter Jun 12 '11 at 5:49
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It depends primarily on how the Canadian economy is designed i.e export oriented or import oriented. If you look at this, it shows more or less equal amount of exports and imports.

For the specific case of Canada, the exports would become costlier, because of a costlier dollar, but at the same time imports would become cheaper. This is only a generalization, not specific goodswise, which would require a more detailed ananlysis.

But investors have a different dilemma. Canadian investors would find it cheaper to invest abroad so may channel their investments abroad because they may find it costlier to invest in Canada. While foreign investors would find it costlier to invest in Canada and may wait for later or invest somehwre else.

Then government may try to boost up investment and start lowering the interest rates, if it sees the rising dollar as detrimental for the Canadian economy and investments flowing abroad instead of Canada.

But what would be the final outcome of the whole rigmarole is little difficult to predict, because something is arriving and something is departing and above all goverment is doing something or is going to do. But the basic gist is Canadian exporters will be sad and Canadian importers will be happy, but vice versa for foreign investors intending to invest in Canada.

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