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Assessing the effects of U.S. shocks on the Canadian economy using alternative identification methods

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  • Souki, Kaouthar
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    Abstract

    This paper investigates the extent of the transmission of U.S. supply and demand shocks to the Canadian economy using three different identification methods. Our findings are robust across identifications. We show that over the flexible exchange rate period, U.S. shocks tend to intensify Canadian business cycles, while they reduce the mean of Canadian prices and inflation. We also find that overall Canadian output is less sensitive to U.S. disturbances than found in earlier studies. Moreover, when the structural shocks are allowed to be correlated across countries, Canadian shocks explain around 18% of U.S. real GDP growth long run forecast error variance.

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    Bibliographic Info

    Article provided by Elsevier in its journal The North American Journal of Economics and Finance.

    Volume (Year): 19 (2008)
    Issue (Month): 2 (August)
    Pages: 193-213

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    Handle: RePEc:eee:ecofin:v:19:y:2008:i:2:p:193-213

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    Web page: http://www.elsevier.com/locate/inca/620163

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    9. Cover, James Peery & Enders, Walter & Hueng, C. James, 2006. "Using the Aggregate Demand-Aggregate Supply Model to Identify Structural Demand-Side and Supply-Side Shocks: Results Using a Bivariate VAR," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(3), pages 777-790, April.
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    Cited by:
    1. Yun Daisy Li & Talan B. Iscan & Kuan Xu, 2007. "The Impact of Monetary Policy Shocks on Stock Prices: Evidence from Canada and the United States," Department of Economics at Dalhousie University working papers archive stock_money19.pdf, Dalhousie, Department of Economics.
    2. Hans Genberg & Pierre L. Siklos, 2009. "Revisiting the Shocking Aspects of Asian Monetary Unification," Working Papers 192009, Hong Kong Institute for Monetary Research.

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