Economics, Econometrics and Finance
4 years ago

Foreign disturbances have major impact on Canadian economy, model falls short.

Can Structural Small Open Economy Models Account for the Influence of Foreign Disturbances?
Alejandro Justiniano, Bruce Preston

Paper Summary

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The study shows that a model of the Canadian economy cannot fully explain how foreign events affect it. The model assumes that shocks from other countries don't have much impact, but this doesn't match real data. When the model is adjusted to allow for related shocks between countries, it still doesn't match the evidence well.