 HOW DOES THE CANADIAN STOCK MARKET REACT TO THE FED'S POLICY?Hamid Shahrestani and Nahid Kalbasi Anaraki The International Journal of Business and Finance Research, 2009, vol. 3, issue 2, 95-104 Abstract: This study examines how the Canadian stock market reacts to the Fed’s policy. Although many research studies have measured the bilateral correlation among national stock markets, rarely have they investigated this correlation within a Free Trade Zone (FTZ). We use a Vector Error Correction Model (VECM) accounting for monetary and exchange rate policies to measure the long-term elasticity of Toronto Stock Exchange (TSE) not only to the Fed’s policy, through the movements of Federal Fund Rate (FFR), but also to the parity value of the Canadian-U.S. dollar exchange rate. The estimated results suggest that TSE is sensitive to both FFR, and the conversion rate of the US-Canadian dollar. The variance decomposition technique helps us to determine the main factors contributing to the movements of TSE. We also use multivariate dynamic forecasts to predict TSE. Keywords: Stock market integrity; financial turmoil; North America Free Trade Agreement (NAFTA); Federal Fund Rate (FFR); Vector Error Correction Model (VECM); Toronto Stock Exchange (TSE). (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:ibf:ijbfre:v:3:y:2009:i:2:p:95-104 Access Statistics for this article The International Journal of Business and Finance Research is currently edited by Terrance Jalbert More articles in The International Journal of Business and Finance Research from The Institute for Business and Finance Research |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.