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Canadian monetary policy analysis using a structural VARMA model

Listed author(s):
  • Mala Raghavan
  • George Athanasopoulos
  • Param Silvapulle

This paper builds a structural VARMA (SVARMA) model for investigating Canadian monetary policy. Using the scalar component methodology proposed by Athanasopoulos and Vahid (2008a), we first identify a VARMA model and then construct a SVARMA for Canadian monetary policy. Relative to the responses by a structural VAR, the responses generated by the SVARMA are consistent with those supported by various theoretical models and solve economic puzzles commonly found in the empirical literature on monetary policy. The superior out-of-sample forecasting performance of the reduced form VARMA compared to VAR alternatives further advocates the suitability of this framework for small open economies.

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File URL: http://economics.ca/cgi/xms?jab=v49n1/CJEv49n1p0347.pdf
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Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 49 (2016)
Issue (Month): 1 (February)
Pages: 347-373

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Handle: RePEc:cje:issued:v:49:y:2016:i:1:p:347-373
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Canadian Economics Association Prof. Steven Ambler, Secretary-Treasurer c/o Olivier Lebert, CEA/CJE/CPP Office C.P. 35006, 1221 Fleury Est Montréal, Québec, Canada H2C 3K4

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