In-between Transatlantic (Monetary) Disturbances

Santiago Camara and Jeanne Aublin

Papers from arXiv.org

Abstract: This paper studies the spillovers of European Central Bank (ECB) interest rate shocks into the Canadian economy and compares them with those of the U.S. Federal Reserve (Fed). We combine a VAR model and local projection regressions with identification strategies that explicitly purge information effects around policy announcements. We find that an ECB rate hike leads to a depreciation of the Canadian dollar and a sharp contraction in economic activity. The main transmission channel is international trade: ECB shocks trigger a decline in oil prices and exports, while leaving domestic financial conditions largely unaffected. By contrast, Fed shocks tighten Canadian financial conditions significantly, with more limited effects on trade flows. These findings show that Canada is exposed to foreign monetary policy both directly and indirectly, through its integration in global financial and trade markets.

Date: 2025-09
References: Add references at CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/2509.13578 Latest version (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:arx:papers:2509.13578

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().