A cointegrated structural VAR model of the Canadian economy

William Crowder and Mark Wohar ()

Applied Economics, 2004, vol. 36, issue 3, 195-213

Abstract: This paper implements a cointegrated structural VAR model of the Canadian economy using quarterly data over the period 1964-1994. The dynamic properties of the estimated model are compared to the predictions of a simple textbook macro model. Four long-run equilibrium relationships are tested: (i) consumption-income; (ii) consumption-wealth; (iii) money demand; and (iv) the Fisher equation. The empirical results obtained are generally consistent with the predictions of the textbook model's long-run implications, although level shifts are observed in the consumption/income and the wealth/income ratios. Similarly it is found that there was an increase in the ex post real interest rate, implying a level shift in the Fisher relation, following the Bank of Canada's policy change towards a stable price level target.

Date: 2004
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DOI: 10.1080/0003684042000175325

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