The article explores how international economic changes impact a small open economy. By analyzing data from Canada and the US, the researchers found that foreign shocks play a significant role in domestic economic fluctuations. Productivity is a key factor driving business cycles, while investment efficiency shocks have limited impact on international spillover. Over time, foreign shocks become more important for the economy. Despite uncorrelated shocks, countries' economies tend to move together. Exchange rate changes have a moderate effect on overall inflation, but impact sector-level prices more strongly. These findings provide new insights into how international factors influence a small open economy's economic performance.