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Analysis of the Value of the Canadian Dollar between
2000 and 2005
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Outline
Canada is considered to be a country with a stable economy
and good perspectives of sustained and long-termed development.
One of the main indicators of the economic stability and high
perspectives is the national currency, Canadian dollar, and
its value.
On analysing the value of the Canadian dollar within the last
five years from 2000 to 2005, it is necessary to take into
consideration several factors influencing its value. First
of all, it should be said that the process of economic globalisation
plays an important role in the value of the Canadian dollar
since it contributes to Canada’s integration in the
world economy and creates new opportunities for Canadian companies
to enter new markets, increase its export, and, consequently,
strengthen national currency.
At this respect, the active participation of Canada in NAFTA
should be pointed out since it involves Canada into free trade
with the countries members of this organisation and such a
situation produces a positive impact on the development of
the Canadian economy at large and increase the value of the
Canadian dollar in particular.
Probably one of the most important factors influencing the
value of the Canadian dollar is its trade and cooperation
with the US. Not surprisingly that there are common trends
in the Canadian American trade and the value of the Canadian
dollar. It should be pointed out that in the period from 2000
to 2005 the trade balance of Canada with the US constantly
remained positive and the lowest point is +67,975 million
US dollars but since 2004 it has started to grow dramatically
and constituted +92,492 million US dollars. At this respect
it is quite noteworthy to trace the dynamics of the value
of the Canadian dollar, which also has risen dramatically
from a value of $0.6568 in December 2000 to $0,8613 in December
2005. In such a situation it the interdependence of the trade
balance and Canadian export, on the one hand, and the value
of the Canadian dollar, on the other, is obvious.
Another important factor that influences the value of the
Canadian dollar is the development of Canadian industries.
However, their impact on the value of the Canadian dollar
is predetermined by the fact that basic Canadian industries
their depend on exports, the degree to which they face competing
imports at home and the extent to which the imported inputs
are used. In such a situation, the increase of the value of
the Canadian dollar compared to 2000-2004 is predetermined
by the growth of exports, positive trade balance, and development
of export-oriented industries.
Thus, the value of the Canadian dollar, being relatively stable,
in recent years, notably in 2004 has grown quite significantly.
Basically it is predetermined by the situation in the international
trade and active cooperation and trade of Canada with its
geographic neighbour, the US, as well as other foreign countries.
At the same time, it makes the value of Canadian dollar, as
well as its basic industries to dependent on the situation
in foreign markets and international trade.
Bibliography:
1. Canadian Broadcast Corporation, “Economy Expected
to Grow 3.2 Percent in 2006: Royal Bank,” found at http://www.cbc.ca/story/business/national/2005/economy.htm,
retrieved Feb. 14, 2006.
2. Canadian Broadcast Corporation, “Big Three Market
Share Rebounds in Canada; Slips in U.S.,” found at http://www.cbc.ca/story/business/national/2005/economy.htm,
retrieved Feb. 14, 2006.
3. Organization for Economic Co-operation and Development
(OECD), “Main Economic Indicators 2005,” Apr.
2005, found at http://lysander.sourceoecd.org/vl=7640236/cl=65/nw=1/rpsv/ij/oecdjournals/04745523/v2005n4/s1/p1l,
retrieved Feb. 14, 2006.
4. Warren, Adrienne. “NAFTA Quarterly,” Scotiabank
Group, winter 2005.
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