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An Up-to-Date and Improved BVAR Model of the Canadian Economy

Author

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  • Daniel Racette
  • Jacques Raynauld
  • Christian Sigouin

Abstract

In this paper, we estimate a fully optimized BVAR model of the Canadian economy for the period 1971-87. The model is well-adapted to the features of a small open economy. We show how it can be used as an input in the monetary policy process either as a forecasting instrument or an analytical tool. In general, forecast results over the 1988-92 period compare well with those of univariate autoregressive models. The results from the variance decomposition exercise show a rather weak influence of monetary aggregates on macroeconomic variables, at least in a short-run context. However, foreign variables, particularly commodity prices, play an important role.

Suggested Citation

  • Daniel Racette & Jacques Raynauld & Christian Sigouin, 1995. "An Up-to-Date and Improved BVAR Model of the Canadian Economy," Macroeconomics 9503002, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpma:9503002
    Note: 50 printed pages, compressed PostScript file. Other recent Bank of Canada working papers are listed on the last page of this report. Bank of Canada WP94-4
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    References listed on IDEAS

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    1. Wirjanto, T.S. & Amano, R.A., 1993. "The Dynamic Demand for Money in Germany, Japan and the United Kingdom," Working Papers 9314, University of Waterloo, Department of Economics.
    2. Amano, R. A. & van Norden, S., 1998. "Oil prices and the rise and fall of the US real exchange rate," Journal of International Money and Finance, Elsevier, vol. 17(2), pages 299-316, April.
    3. P Clark & D Laxton, 1997. "Phillips Curves," CEP Discussion Papers dp0344, Centre for Economic Performance, LSE.
    4. Simon van Norden & Huntley Schaller & ), 1995. "Speculative Behaviour, Regime-Switching, and Stock Market Crashes," Econometrics 9502003, University Library of Munich, Germany.
    5. Robert Lafrance & Pierre St-Amant, 2000. "Les zones monétaires optimales," L'Actualité Economique, Société Canadienne de Science Economique, vol. 76(4), pages 577-612.
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    Cited by:

    1. Wouter J. Den Haan & Steven W. Sumner & Guy M. Yamashiro, 2009. "Bank loan portfolios and the Canadian monetary transmission mechanism," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 42(3), pages 1150-1175, August.
    2. Patricio Jaramillo, 2009. "Estimación de VAR Bayesianos para la Economía Chilena," Revista de Analisis Economico – Economic Analysis Review, Universidad Alberto Hurtado/School of Economics and Business, vol. 24(1), pages 101-126, Junio.
    3. J T Kneeshaw, 1995. "A survey of non-financial sector balance sheets in industialised countries: implications for the monetary policy transmission mechanism," BIS Working Papers 25, Bank for International Settlements.

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