underlying inflation is largely offset by an appreciation of our exchange rate. this helps limit the direct impact of higher commodity prices on the prices all canadians pay for food, gas and other commodity - intensive goods. when commodity prices increase, revenues from the resource sector spread through the canadian economy via three channels : fiscal redistribution, especially by the federal government ; personal wealth increases, through income and ownership of stock ; and interprovincial trade. it is important to recognise that, for almost all the provinces, trade inside canada has grown fast enough to offset a significant portion of the declines in international trade. central canada, for instance, suffered a real decline in international exports of $ 18 billion between 2002 and 2008, which was almost entirely offset by increases in interprovincial exports of $ 16 billion. some of this reflects increased sales to western canada from central canadian machinery makers, primary metal producers, and chemical companies. much of the gains in interprovincial trade volumes were in services rather than goods, which was where most of the declines in international exports occurred. well - paid services, such as professional, mining, and financial services, play a significant role in increased trade between central canada and alberta ( charts 12 and 13 ). improving canada ’ s economic health recognising that higher commodity prices are good for the canadian economy does not mean that policy has no role. the first objective of policy, of course, should be to do no harm. this brings me to the exchange rate. modelled as an increase in u. s. potential output. bis central bankers ’ speeches should the bank lean against the exchange rate? some have argued that the bank of canada could improve welfare by leaning against commodity - driven movements in the nominal exchange rate. it is important to remember that with changes in the terms of trade, adjustments will follow. it is only a question of how. our floating exchange rate helps to achieve the appropriate adjustments without forcing very difficult changes in the overall levels of wages, output and prices. we can use totem to simulate the effect of the bank leaning against a commodity - driven exchange rate appreciation through a reduction to the policy rate. in the short run, stabilising the nominal exchange rate helps to support non - commodity exports as well as canadian producers who face competition from imports. but, ultimately, this effort is futile. over time, wages and inflation rise, causing the real exchange rate to appreciate. non - resource exporters are faced with the same competitiveness challenges as they are

remarks by lawrence schembri deputy governor greater saskatoon chamber of commerce ( by videoconference ) june 18, 2020 living with limits : household behaviour in canada in the time of covid - 19 introduction good morning. i hope you are all well in saskatoon. i very much regret that i cannot be with you in person today. the covid - 19 pandemic has disrupted all of our lives — unfortunately, some more severely than others. and because of this pandemic, we are all living with limits on our behaviour. one of the things i enjoy most about giving public speeches as a deputy governor is having the opportunity to visit different towns and cities throughout canada and especially to meet people like you. i very much like listening and learning about your businesses and the local economy and discussing the bank of canada, our economic outlook and our policies. we are fortunate to be living at a time when technology can make some of this experience possible even under the current circumstances. collecting your views will be most helpful today because i want to talk about the impact of the virus and the related containment measures on the day - to - day behaviour of canadian households. specifically, i would like to examine how spending patterns for goods and services and for housing have changed. i ’ d also like to discuss shifts we are seeing in household borrowing behaviour and indebtedness. analyzing the behaviour of canadian households during the containment period and the early stage of reopening will give us insights into how the economy might perform in the future. in particular, we are interested in the speed, strength and breadth of the pickup in economic activity during the recovery period. consumption and housing will be critical to the recovery because they normally represent roughly two - thirds of economic activity in canada. 1 1 statistics canada defines consumption as spending on goods and services that are consumed by the household within the year they are purchased, while the definition of residential investment ( housing ) i would like to thank mikael khan, fotios raptis, patrick sabourin and brian peterson for their help in preparing this speech and rebecca frost for superb research assistance. not for publication before june 18, 2020 1330 eastern time - 2household behaviour since the outbreak of the virus in canada in mid - march has been shaped by changes to both supply and demand. on the supply side, the restrictions on the goods and services available for sale have changed what canadians are buying. on the demand side, the economic lockdown has had a major impact on household income