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Tendance des dépenses publiques et de l'inflation et évolution comparative du taux de chômage au Canada et aux États-Unis

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Author Info
St-Amant, P.
Tessier, D.

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Abstract

The authors' purpose in this paper is to isolate the respective contributions of budgetary and monetary policy in Canada and the United States to the behaviour of unemployment rates in the two countries. Their method consists of estimating VAR models and using long-term identification restrictions to perform a structural analysis. Budgetary policy shocks are defined as those VAR innovations that cause a change in the trend of the public-spending-to-GDP ratio, while monetary policy shocks are those innovations that modify the trend of inflation. The major finding is that the comparative evolution of unemployment rates in Canada and the United States is linked primarily to the different budgetary policy choices in the two countries. Monetary policy does have some effect on the behaviour of unemployment rates in the two countries, but it does not explain the divergent trends, the primary cause of the U.S.-Canada unemployment gap that has been apparent since the 1970s. The authors estimate, moreover, that the trend in the Canadian unemployment rate has declined significantly over the last few years.

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File URL: http://www.bankofcanada.ca/en/res/wp/1998/wp98-3.pdf
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Paper provided by Bank of Canada in its series Working Papers with number 98-3.

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Length: 33 pages
Date of creation: 1998
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Handle: RePEc:bca:bocawp:98-3

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Related research
Keywords: Fiscal policy;

Find related papers by JEL classification:
E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Duguay, Pierre, 1994. "Empirical evidence on the strength of the monetary transmission mechanism in Canada: An aggregate approach," Journal of Monetary Economics, Elsevier, vol. 33(1), pages 39-61, February. [Downloadable!] (restricted)
  2. Faust, Jon & Leeper, Eric M, 1997. "When Do Long-Run Identifying Restrictions Give Reliable Results?," Journal of Business & Economic Statistics, American Statistical Association, vol. 15(3), pages 345-53, July.
    Other versions:
  3. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January. [Downloadable!] (restricted)
  4. Baxter, Marianne & King, Robert G, 1993. "Fiscal Policy in General Equilibrium," American Economic Review, American Economic Association, vol. 83(3), pages 315-34, June. [Downloadable!] (restricted)
    Other versions:
  5. George A. Akerlof & William R. Dickens & George L. Perry, 1996. "The Macroeconomics of Low Inflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 27(1996-1), pages 1-76. [Downloadable!]
  6. Bullard, James & Keating, John W., 1995. "The long-run relationship between inflation and output in postwar economies," Journal of Monetary Economics, Elsevier, vol. 36(3), pages 477-496, December. [Downloadable!] (restricted)
  7. Alain DeSerres & Alain Guay, 1995. "Selection of the Truncation Lag in Structural VARs (or VECMs) with Long-Run Restrictions," Econometrics 9510001, EconWPA. [Downloadable!]
  8. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November. [Downloadable!] (restricted)
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  9. Blanchard, Olivier Jean & Quah, Danny, 1989. "The Dynamic Effects of Aggregate Demand and Supply Disturbances," American Economic Review, American Economic Association, vol. 79(4), pages 655-73, September. [Downloadable!] (restricted)
    Other versions:
  10. Peter C.B. Phillips, 1995. "Impulse Response and Forecast Error Variance Asymptotics in Nonstationary VAR's," Cowles Foundation Discussion Papers 1102, Cowles Foundation, Yale University. [Downloadable!]
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  11. Riddell, W.C. & Card, D., 1992. "A Comparative Analysis of Unemployment in Canada and United States," UBC Departmental Archives 92-07, UBC Department of Economics.
  12. David Card & W. Craig Riddell, 1993. "A Comparative Analysis of Unemployment in Canada and the United States," NBER Chapters, in: Small Differences That Matter: Labor Markets and Income Maintenance in Canada and the United States, pages 149-190 National Bureau of Economic Research, Inc. [Downloadable!]
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  13. Card, D. & Riddell, W.C., 1996. "Unemployment in Canada and the United States: A Further Analysis," UBC Departmental Archives 96-09, UBC Department of Economics.
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  14. McGrattan, Ellen R & Rogerson, Richard & Wright, Randall, 1997. "An Equilibrium Model of the Business Cycle with Household Production and Fiscal Policy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 38(2), pages 267-90, May.
    Other versions:
  15. Braun, Phillip A. & Mittnik, Stefan, 1993. "Misspecifications in vector autoregressions and their effects on impulse responses and variance decompositions," Journal of Econometrics, Elsevier, vol. 59(3), pages 319-341, October. [Downloadable!] (restricted)
  16. Cote, D. & Hostland, D., 1996. "An Econometric Examination of the Trend Unemployment Rate in Canada," Working Papers 96-7, Bank of Canada. [Downloadable!]
  17. Andrews, Donald W K, 1993. "Tests for Parameter Instability and Structural Change with Unknown Change Point," Econometrica, Econometric Society, vol. 61(4), pages 821-56, July. [Downloadable!] (restricted)
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  18. Alain Paquet, 1993. "Dépenses publiques et taxation proportionnelle dans les modèles réels du cycle," Cahiers de recherche CREFE / CREFE Working Papers 17, CREFE, Université du Québec à Montréal.
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Murray, John & Mark Zelmer & Zahir Antia, 2000. "International Financial Crises and Flexible Exchange Rates: Some Policy Lessons from Canada," Technical Reports 88, Bank of Canada. [Downloadable!]
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