Session 4 Exchange Rate Uncertainty, Investment, and ：会话4汇率的不确定性，投资，和精品.pdfVIP

Session 4: Exchange Rate Uncertainty, Investment, and Productivity Exchange Rate Variability and Investment in Canada Robert Lafrance and David Tessier* Introduction This paper examines the relationship between the real exchange rate and investment. The specific question that we address is the extent to which the flexible exchange rate regime might have been detrimental to investment in Canada. It has been suggested that flexible exchange rates can lead to excessive short-term exchange rate volatility and episodic bouts of currency misalignments, hampering the continental integration that was stimulated by the Canada-U.S. Free Trade Agreement (FTA) and NAFTA and limiting profitable trade opportunities. 1 For example, Courchene and Harris (1999) argue that while floating exchange rates are a smaller problem for com- modity producers, since most resource exports are already priced in U.S. dollars and currency hedging is relatively straightforward, the lack of longer-run hedging facilities can make exchange rate movements problematic for the manufacturing sector. Their point is that free trade requires stable and predictable rates of international exchange and cost calculations to support the volumes of trade and the degree of specialization 1. The effect may not be large. Gaston and Trefler (1997) estimate that tariff cuts under the 1988 Canada-U.S. FTA explain only 9 to 14 per cent of lost manufacturing jobs during 1989–93, the bulk of which could be traced to the combined effects of corporate restructuring that predated the FTA, a severe recession, and the monetary policy stance during the period. * We are grateful to Kevin Clinton and James Powell for their comments and suggestions. Tracy Chan provided us with excellent technical support. 239 240