Arbeitspapier
The impact of the global business cycle on small open economies: A FAVAR approach for Canada
Building on the growing evidence on the importance of large data sets for empirical macroeconomic modeling, we use a factor-augmented VAR (FAVAR) model with more than 260 series for 20 OECD countries to analyze how global developments affect the Canadian economy. We focus on several sources of shocks, including commodity prices, foreign economic activity, and foreign interest rates. We evaluate the impact of each shock on key Canadian macroeconomic variables to provide a comprehensive picture of the effect of international shocks on the Canadian economy. Our findings indicate that Canada is primarily exposed to shocks to foreign activity and to commodity prices. In contrast, the impact of shocks to global interest rates or global inflation is substantially lower. Our findings also expose the different channels through which higher commodity prices impact the Canadian economy: Canada benefits from higher commodity prices through a positive terms of trade shock, but at the same time, higher commodity prices tend to lower global economic activity, hurting demand for Canadian exports.
- Language
-
Englisch
- Bibliographic citation
-
Series: Bank of Canada Working Paper ; No. 2011-2
- Classification
-
Wirtschaft
Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
Open Economy Macroeconomics
- Subject
-
International topics
Econometric and statistical methods
Business fluctuations and cycles
Globalisierung
Internationale Wirtschaftsbeziehungen
Volkswirtschaft
Konjunktur
VAR-Modell
OECD-Staaten
Kanada
- Event
-
Geistige Schöpfung
- (who)
-
Vasishtha, Garima
Maier, Philipp
- Event
-
Veröffentlichung
- (who)
-
Bank of Canada
- (where)
-
Ottawa
- (when)
-
2011
- DOI
-
doi:10.34989/swp-2011-2
- Handle
- Last update
-
10.03.2025, 11:42 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Vasishtha, Garima
- Maier, Philipp
- Bank of Canada
Time of origin
- 2011
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