Gopinath, Itskhoki and Rigobon (2010) find 96 per cent of Canada’s exports to the United States over the 1994–2005 period were priced in US dollars. 18 In other words, the Bank of Canada’s reaction function to various shocks was not well understood.
7 Let me make it clear that I think that currency competition has been a much larger force in emergingmarket economies, in which the costs of poor policies have been demonstrated quite clearly, than in advanced economies.