A POLICY ANALYSIS OF EXCHANGE RATE FLUCTUATIONS ON THE RURAL SECTOR: THE EXPERIENCE OF THE CANADIAN RED MEAT INDUSTRY*

Since 1976 the Canadian dollar has devalued by more than 20 percent vis-à-vis the US dollar. Many commentators have hypothesised that the devaluation has provided substantial benefits to Canadian producers of red meat. To test this hypothesis, a policy model of the North American red meat sector is formulated which captures the exchange rate effects on both product and factor prices. The model specification and validation are presented, followed by the simulation results for a 10 percent devaluation of the Canadian dollar. The major conclusion is that the exchange rate has not been a significant factor in the determination of production, consumption and trade of red meats.