The Propagation of U.S. Shocks to Canada: Understanding the Role of Real Financial Linkages

28 Pages Posted: 31 Jul 2014

See all articles by Kimberly Beaton

Kimberly Beaton

International Monetary Fund (IMF) - Research Department

Rene Lalonde

International Monetary Fund (IMF) - Research Department

Stephen Snudden

Queen's University - Department of Economics; International Monetary Fund (IMF)

Date Written: May/mai 2014

Abstract

English Abstract: This paper examines the role of financial frictions in affecting the transmission of U.S. real and financial shocks to Canada using a dynamic stochastic general‐equilibrium model with an active banking sector and financial frictions. We find that the U.S. banking and interbank markets can be a potentially important source of variability of Canadian output and inflation - consistent with the financial crisis. The presence of both the demand and the real supply sides of credit in the model help to capture the stylized facts of both the domestic and the international business cycles.

French Abstract: Le texte examine le rôle des frictions financières dans la transmission de chocs réels et financiers des États‐Unis vers le Canada à l'aide d'un modèle d’équilibre général dynamique et stochastique quand existent un secteur bancaire actif et des frictions financières. On découvre que le système bancaire et les marchés interbanques américains peuvent être une source potentiellement importante de variabilité du produit et de l'inflation au Canada – comme on l'a observé dans la crise financière récente. La présence à la fois de la demande et de l'offre de crédit dans le modèle aide à capter les faits stylisés des cycles d'affaires domestiques et internationaux.

JEL Classification: F36, F44

Suggested Citation

Beaton, Kimberly and Lalonde, René and Snudden, Stephen, The Propagation of U.S. Shocks to Canada: Understanding the Role of Real Financial Linkages (May/mai 2014). Canadian Journal of Economics/Revue canadienne d'économique, Vol. 47, Issue 2, pp. 466-493, 2014, Available at SSRN: https://ssrn.com/abstract=2474385 or http://dx.doi.org/10.1111/caje.12079

Kimberly Beaton (Contact Author)

International Monetary Fund (IMF) - Research Department

700 19th Street NW
Washington, DC 20431
United States

René Lalonde

International Monetary Fund (IMF) - Research Department ( email )

700 19th Street NW
Washington, DC 20431
United States

Stephen Snudden

Queen's University - Department of Economics ( email )

99 University Avenue
Kingston K7L 3N6, Ontario
Canada

HOME PAGE: http://www.econ.queensu.ca/snudden/home

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
0
Abstract Views
317
PlumX Metrics