Therefore, the flexible exchange rate doesn’t absorb the commodity price shock as much as it helps the economy adjust more easily to the shock by smoothing the adjustment in relative prices.14 This relatively smooth adjustment is in stark contrast to the counterfactual exercise where the relative price adjustment occurred from a sharp fall in output, a pronounced rise in unemployment and lower wages and prices.
In Alberta, you’ve seen both sides of this adjustment. When oil prices rose between 2002 and 2008, the Canadian dollar soared alongside to reach parity with the US dollar. Ontario’s manufacturing sector lost competitiveness as its goods became more expensive overseas, and 5 / 11  BIS central bankers' speeches  investment and workers flowed into the energy sector in Alberta and Saskatchewan.