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This paper examines the ability of a number of financial variables to predict Canadian recessions. Regarding methodology, we follow closely the technique employed by Estrella and Mishkin (1998), who use a probit model to predict U.S. recessions up to eight quarters in advance. Our main finding is that the spread between the yield on Canadian […]

In a recent article, Faust and Leeper (1997) discuss reasons why inference from structural VARs identified with long-run restrictions may not be reliable. In this paper, the authors argue that there are reasons to believe that Faust and Leeper's arguments are not devastating in practice. First, simulation exercises suggest that this approach does well when […]

The authors' purpose in this paper is to isolate the respective contributions of budgetary and monetary policy in Canada and the United States to the behaviour of unemployment rates in the two countries. Their method consists of estimating VAR models and using long-term identification restrictions to perform a structural analysis. Budgetary policy shocks are defined […]

Empirical evidence suggests that the unemployment rate and the export/GNP ratio are positively correlated with external debt across developing countries. This paper develops a dynamic model that provides an explanation for the aforementioned relationships. The central idea of our paper is that international borrowing affects unemployment and specialization patterns by unevenly changing the risk-sharing structure—across […]

A small-open-economy model is developed to examine how the method of food aid disbursement affects labor employment, food security and aggregate welfare, in recipient countries, in an environment in which private sector firms pay efficiency wages to induce effort. Two forms of food aid delivery are considered: first is project food aid, under which food […]

Cyclical contractions are often referred to as inventory cycles, in part because movements in inventories can amplify cyclical fluctuations in output. An unanticipated slowing in demand generally leads to an unintended buildup of inventories: only with a lag do firms adjust production and their actual holding of inventories relative to the desired level.

A monetary authority with the primary objective of price stability has to distinguish between temporary price shocks and persistent shocks to the rate of inflation. A measure of underlying inflation, therefore, has an important role to play as a guideline for monetary policy.

The purpose of this study is to compare the behaviour of regional labour markets in Canada and the United States. The study shows that the degree of persistence of unemployment is significantly higher in the provinces of Canada than it is in the various American regions.

This paper analyses how Canadian financial firms manage short-term interest rate risk through the use of BAX futures contracts. The results show that the most effective hedging strategy is, on average, a static strategy based on linear regression that assumes constant variances, even though dynamic models allowing for time-varying variances are found to have superior explanatory power.

This paper documents the structure and properties of the Canadian Policy Analysis Model (CPAM). CPAM is designed to provide a reasonably complete representation of the Canadian macro economy.