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A cointegrated structural VAR model of the Canadian economy

Listed author(s):
  • William Crowder
  • Mark Wohar

This paper implements a cointegrated structural VAR model of the Canadian economy using quarterly data over the period 1964-1994. The dynamic properties of the estimated model are compared to the predictions of a simple textbook macro model. Four long-run equilibrium relationships are tested: (i) consumption-income; (ii) consumption-wealth; (iii) money demand; and (iv) the Fisher equation. The empirical results obtained are generally consistent with the predictions of the textbook model's long-run implications, although level shifts are observed in the consumption/income and the wealth/income ratios. Similarly it is found that there was an increase in the ex post real interest rate, implying a level shift in the Fisher relation, following the Bank of Canada's policy change towards a stable price level target.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/0003684042000175325
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Article provided by Taylor & Francis Journals in its journal Applied Economics.

Volume (Year): 36 (2004)
Issue (Month): 3 ()
Pages: 195-213

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Handle: RePEc:taf:applec:v:36:y:2004:i:3:p:195-213
DOI: 10.1080/0003684042000175325
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  1. Cooley, Thomas F. & Leroy, Stephen F., 1985. "Atheoretical macroeconometrics: A critique," Journal of Monetary Economics, Elsevier, vol. 16(3), pages 283-308, November.
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  4. Peter C.B. Phillips, 1985. "Time Series Regression with a Unit Root," Cowles Foundation Discussion Papers 740R, Cowles Foundation for Research in Economics, Yale University, revised Feb 1986.
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  8. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
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  10. Elliott, Graham, 1999. "Efficient Tests for a Unit Root When the Initial Observation Is Drawn from Its Unconditional Distribution," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(3), pages 767-783, August.
  11. Serena Ng & Pierre Perron, 2001. "LAG Length Selection and the Construction of Unit Root Tests with Good Size and Power," Econometrica, Econometric Society, vol. 69(6), pages 1519-1554, November.
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  16. R. Tiff Macklem, 1997. "Aggregate Wealth in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 30(1), pages 152-168, February.
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