Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/67803
Authors: 
Bhuiyan, Rokon
Year of Publication: 
2008
Series/Report no.: 
Queen's Economics Department Working Paper 1183
Abstract: 
This paper develops an open-economy Bayesian structural VAR model for Canada in order to estimate the effects of monetary policy shocks, using the overnight target rate as the policy instrument. I allow the policy variable and the financial variables of the model to interact simultaneously with each other and with a number of other home and foreign variables. When I estimate this over-identified VAR model, I find that the policy shock transmits to real output through both the interest rate and exchange rate channels, and the shock does not induce a departure from uncovered interest rate parity. I also find that the impulse response of the monetary aggregate, M1, does not exactly follow the impulse response of the target rate. Finally, I find that Canadian variables significantly responds to the US federal funds rate shock, and external shocks are an important source of Canadian output fluctuations.
Subjects: 
monetary policy
structural VAR
block exogeneity
impulse response
JEL: 
C32
E52
F37
Document Type: 
Working Paper

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