Can structural small open economy models account for the influence of foreign disturbances? / Alejandro Justiniano, Bruce Preston.
Material type:
TextSeries: Working paper series (National Bureau of Economic Research) ; no. 14547.Publication details: Cambridge, Mass. : National Bureau of Economic Research, 2008Description: 27, [8] p. : ill. ; 22 cmSubject(s): International economic relations | Canada -- Economic conditions -- Econometric modelsLOC classification: HB1 | .N38 no. 14547Online resources: Click here to access online Summary: This paper demonstrates that an estimated, structural, small open economy model of the Canadian economy cannot account for the substantial influence of foreign-sourced disturbances identified in numerous reduced-form studies. The benchmark model assumes uncorrelated shocks across countries and implies that U.S. shocks account for less than 3 percent of the variability observed in several Canadian series, at all forecast horizons. Accordingly, model-implied cross-correlation functions between Canada and U.S. are essentially zero. Both findings are at odds with the data. A specification that assumes correlated cross-country shocks partially resolves this discrepancy, but still falls well short of matching reduced-form evidence.
| Item type | Current library | Collection | Call number | Copy number | Status | Date due | Barcode |
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University of Macedonia Library Βιβλιοστάσιο Β (Stack Room B) | Research Papers | HB1.N38 no. 14547 (Browse shelf (Opens below)) | 1 | Available | 0013116439 |
Includes bibliographical references (p. 24-27).
This paper demonstrates that an estimated, structural, small open economy model of the Canadian economy cannot account for the substantial influence of foreign-sourced disturbances identified in numerous reduced-form studies. The benchmark model assumes uncorrelated shocks across countries and implies that U.S. shocks account for less than 3 percent of the variability observed in several Canadian series, at all forecast horizons. Accordingly, model-implied cross-correlation functions between Canada and U.S. are essentially zero. Both findings are at odds with the data. A specification that assumes correlated cross-country shocks partially resolves this discrepancy, but still falls well short of matching reduced-form evidence.
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