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Measuring regional effects of monetary policy in Canada

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  • George Georgopoulos
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    Abstract

    This article measures monetary policy shocks and examines whether the effects of such shocks have differential regional effects in Canada. We identify three possible sources of regional effects: differences in the importance of interest-sensitive industries, differences in the contribution of exports to output and differences in the proportion of small relative to large firms. Using the overnight interest rate as the instrument of monetary policy, we present impulse responses of industry output from a recursive vector autoregression, which incorporates a cointegrating relation. The results show that manufacturing and primary industries are the most interest sensitive. We conduct impulse responses of provincial employment from a monetary contraction. The results show that Newfoundland and Prince Edward Island (PEI), primary industry-based provinces, are strongly and adversely affected by a monetary contraction. Manitoba, Saskatchewan and Alberta, also primary-based, are also affected. Ontario, which is manufacturing-based, is also affected but to a lesser extent. The response of Quebec, New Brunswick, Nova Scotia and British Columbia are not statistically significant.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/00036840701604362
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal Applied Economics.

    Volume (Year): 41 (2009)
    Issue (Month): 16 ()
    Pages: 2093-2113

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    Handle: RePEc:taf:applec:v:41:y:2009:i:16:p:2093-2113

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    Cited by:
    1. Vespignani, Joaquin L., 2013. "The industrial impact of monetary shocks during the inflation targeting era in Australia," Working Papers 2012-12, University of Tasmania, School of Economics and Finance, revised 17 Jan 2013.
    2. Jean Louis, Rosmy & Brown, Ryan & Balli, Faruk, 2011. "On the Feasibility of Monetary Union: Does It Make Sense to Look for Shocks Symmetry across Countries When None of the Countries Constitutes an Optimum Currency Area?," MPRA Paper 39942, University Library of Munich, Germany.
    3. Joaquin L. Vespignani, 2013. "The Industrial Impact of Monetary Shocks During the Inflation-Targeting Era in A ustralia," Australian Economic History Review, Economic History Society of Australia and New Zealand, vol. 53(1), pages 47-71, 03.
    4. Vespignani, Joaquin L., 2011. "On the differential impact of monetary policy across states/territories and its determinants in Australia: Evidence and new methodology from a small open economy," MPRA Paper 44998, University Library of Munich, Germany.

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