Financial Spillovers Across Countries: The Case of Canada and the United States
AbstractThe authors investigate financial spillovers across countries with an emphasis on the effect of shocks to financial conditions in the United States on financial conditions and economic activity in Canada. These questions are addressed within a global vector autoregression model. The framework links individual country vector autoregression models in which the domestic variables are related to the country-specific foreign variables. The authors' results highlight the importance of financial variables in the transmission of shocks to real activity and financial conditions in the United States to Canada. First, they show that shocks to U.S. output are transmitted quickly to Canada, with important implications for financial conditions. Second, they show that the most important source of financial transmission between the United States and Canada is through shocks to U.S. equity prices. Financial transmission through movements in the quantity of U.S. credit is also important for Canada.
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Bibliographic InfoPaper provided by Bank of Canada in its series Discussion Papers with number 11-1.
Length: 37 pages
Date of creation: 2011
Date of revision:
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Business fluctuations and cycles; Economic models; Financial stability; International topics;
Find related papers by JEL classification:
- E27 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
- F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General
This paper has been announced in the following NEP Reports:
- NEP-ALL-2011-02-05 (All new papers)
- NEP-BEC-2011-02-05 (Business Economics)
- NEP-CBA-2011-02-05 (Central Banking)
- NEP-IFN-2011-02-05 (International Finance)
- NEP-MAC-2011-02-05 (Macroeconomics)
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