Identifying Key Macroeconomic Shocks to Canadian GDP

Jamil Sayeed

EERI Research Paper Series from Economics and Econometrics Research Institute (EERI), Brussels

Abstract: This paper seeks to identify the largest two shocks that can explain the movement in Canadian GDP for the period 1981Q1 to 2011Q4. I employ a very flexible identification method proposed by Uhlig (2003) that allows us to identify the key shocks from the time series data without imposing any strict identification assumption. The largest two shocks are extracted by maximizing the forecast error variance of GDP for a ten years horizon. Two shocks are sufficient to explain most of the variation in the GDP in Canada. My findings suggest that TFP news shock is the key driver of GDP in the medium run and it creates significant positive co-movements among the aggregate variables at business cycle frequencies. Demand shock dominates in the short run, however, its hard to pin down the exact source of the shock. The findings are robust to alternative SVAR identification strategy and variable specification.

Keywords: Macroeconomic Shocks; TFP News Shock; Canadian GDP; Forecast Error Variance (search for similar items in EconPapers)
JEL-codes: C32 E20 E32 E63 O32 (search for similar items in EconPapers)
Date: 2020-11-11
New Economics Papers: this item is included in nep-mac and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.eeri.eu/documents/wp/EERI_RP_2020_11.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eei:rpaper:eeri_rp_2020_11

Access Statistics for this paper

More papers in EERI Research Paper Series from Economics and Econometrics Research Institute (EERI), Brussels Contact information at EDIRC.
Bibliographic data for series maintained by Julia van Hove ().