 Canada’s Exchange Rate Regime and North American Economic Integration: The Role of Risk-Sharing MechanismsZahir Antia, Ramdane Djoudad and Pierre St-Amant () Staff Working Papers from Bank of Canada Abstract: Our contribution in this paper is threefold. First, we survey the empirical literature on consumption smoothing mechanisms of regional economic shocks. Second, building on the work of Asdrubali et al. (1996), we present evidence on the role played by various smoothing mechanisms for specific economic shocks affecting Canadian provinces. Third, we assess whether smoothing mechanisms play a role at the North American level in facilitating the adjustment to shocks affecting Canada and the United States specifically. Our main conclusion is that there appears to be substantially more smoothing of specific provincial shocks across Canadian provinces than there is smoothing of specific shocks affecting the two countries. From this perspective, and in the absence of major structural changes, a Canada–U.S. monetary union would pose several challenges. We also conclude that the “quantity anomaly,” i.e., the empirical finding that consumption tends to be less correlated than output across countries and across U.S. states, is not present in Canadian provincial data. Keywords: Exchange rates; exchange rate regimes (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:99-17 Access Statistics for this paper More papers in Staff Working Papers from Bank of Canada 234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada. Contact information at EDIRC. |
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