Canada-US economic integration following NAFTA

This paper evaluates the extent and implications of Canada-U.S. economic integration in the wake of two formal trade liberalization agreements. The paper considers how quantity and price measures can be used to assess integration, then surveys the evidence on the extent of integration. Overall, we find little evidence that these trade agreements had significant incremental impacts on economic integration between Canada and the United States. We find some evidence that exchange rate variability may discourage integration. Microeconomic efficiency has not been enhanced through alignment of prices and costs and the volatility of the Canada-U.S. exchange rate may also account for this. The finding provides some tentative evidence in favor of a common currency arrangement.