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Variations Across Canadian Regions in the Sensitivity to U.S. Monetary Policy

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  • Todd Potts

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  • David Yerger

    ()

Abstract

This paper contributes to the research on regional economic responses to monetary policy shocks in two ways. First, rather than just model the Canadian economy at the national level, we examine the impact of monetary policy shocks across five separate Canadian regions. The second extension of the literature is our focus upon estimating the impact from both Canadian and U.S. monetary policy shocks upon regional Canadian economic activity. The findings are broadly consistent with results from previous research modeling the national Canadian economy, but noteworthy regional differences are observed. Eastern Canadian regions, defined as Ontario (ON), Quebec (QU), and Atlantic (AT), exhibit greater sensitivity to Canadian monetary policy shocks than do Western Canadian regions. We also find that U.S. monetary policy shocks have a discernable impact on Canadian regional economic activity, but the impact varies across regions. For the three Eastern Canadian regions ON, QU, and AT, there is a significant impact upon regional economic activity from a U.S. monetary policy shock, but not for the two Western Canadian regions Prairie (PR) and West (WE). Moreover, the impact on ON, QU, and AT from a fed funds shock is quite similar to the impact from a shock to the Canadian Bank Rate. Copyright International Atlantic Economic Society 2010

Suggested Citation

  • Todd Potts & David Yerger, 2010. "Variations Across Canadian Regions in the Sensitivity to U.S. Monetary Policy," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 38(4), pages 443-454, December.
  • Handle: RePEc:kap:atlecj:v:38:y:2010:i:4:p:443-454
    DOI: 10.1007/s11293-010-9248-9
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    References listed on IDEAS

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    Cited by:

    1. Ageliki Anagnostou & Stephanos Papadamou, 2012. "The effects of Monetary Policy shocks across the Greek Regions," ERSA conference papers ersa12p507, European Regional Science Association.
    2. Angeliki ANAGNOSTOU & Stephanos PAPADAMOU, 2014. "The Impact Of Monetary Shocks On Regional Output: Evidence From Four South Eurozone Countries," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 39, pages 105-130.
    3. Kazi, Irfan Akbar & Wagan, Hakimzadi & Akbar, Farhan, 2013. "The changing international transmission of U.S. monetary policy shocks: Is there evidence of contagion effect on OECD countries," Economic Modelling, Elsevier, vol. 30(C), pages 90-116.

    More about this item

    Keywords

    Vector autoregression; Impulse response function; Monetary policy; Canadian regional employment; C32; E52; F42; R1;

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics

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