look very healthy with the amount of exports far outweighing the imports. 1997 spelled a big decrease in the trade balance and the numbers from 1998 show much of the same.Year19941995199619971998Exports (mil of U.S. $)228,167.10265,333.90279,891.80301,381.40322,262.40Imports (mil of U.S. $)207872.50229936.50237917.20277707.80303399.70Trade Balance20294.6035397.4041974.6023673.6018862.70*Data extrapolated from CANISM, Statistics Canadas online statistical database But as Appendix 1 indicates, 1997 was the beginning of the gradual decent of the Canadian dollar, until it reached its low in August of 1998. This translates to the relatively more expensive foreign products (imports), as Canadas ability to purchase and make good on its domestic products (exports) being sold overseas decreases. In other words, the cost to buy foreign products rose while the amount of money taken in on imports when converted to their currency fell. This is again demonstrated as you look at the amount of exports. It continues rise, but not as quickly due to the lower exchange rate. Couple that with higher prices paid for the imports equals a significant decrease in the trade balance. The balance in 1998, in fact, was lower than the balance in 1994.Interest RatesA final economic indicator that helps us to explain the reasons behind the exchange rate drop is to look at a few of the key interest rates in the economy in and around that time.Year19951996199719981999Bank Rate7.314.533.525.14.91Prime Business Loan Rate8.656.064.966.66.43Consumer Loan Rate11.889.198.759.2710.18*Data extrapolated from CANISM, Statistics Canadas online databaseAs exhibited with the figures, there is serious decrease in all of these interest rates from 1995 to 1996. 1998 started off well enough, but by mid-year the optimism was being abruptly clouded by a decreasing currency, which seemed to be related to the low rates of interest being charged. This decrease demonstrates a stron...
