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February 8, 2018

Contrary to popular belief, commodity prices are not the best predictor of the future exchange rate for the Canadian dollar, according to new research from the C.D. Howe Institute. In “Understanding the Volatility of the Canadian Exchange Rate”, authors Martin Eichenbaum, Benjamin K. Johannsen, and Sergio Rebelo find the current real exchange rate, (ie., minus inflation) is more useful than commodity prices for forecasting changes in the Canada/US nominal exchange rate. 

Martin Eichenbaum
Martin Eichenbaum

Martin Eichenbaum is the Charles Moskos Professor of economics at Northwestern University and the co-director of the Center for International Economics at Northwestern University. He has been at Northwestern University since 1988.  He has also taught at the University of Chicago and the Wharton School, University of Pennsylvania.