An Empirical Comparison of Canadian-American Business Cycle Fluctuations with Special Reference to the Phillips Curve

Robert F. Mulligan

A chapter in Studies in Austrian Macroeconomics, 2016, vol. 20, pp 163-194 from Emerald Group Publishing Limited

Abstract: Monthly 1980–2014 data are examined to determine how employment responds to money supply shocks in Canada and the United States. The focus of the analysis is a comparison of the real economies’ responses to the financial crisis and the great recession. Employment is used as a proxy for real output, though it may respond to monetary shocks with a longer lag. Vector autoregression models are specified, estimated, and interpreted. Impulse response functions are examined to assess the impact of innovations in monetary policy. A comparison of the response of employment to monetary innovations allows for evaluation of alternative business cycle theories and of the relative efficacy ofCanadian v. U.S. monetary policy. Cross-border impacts are also assessed. Granger causality tests are used to examine whether money supply growth causes unemployment, whether monetary shocks cause higher or lower employment, and distinguish between short-run and long-run effects.

Keywords: Business cycle; Phillips curve; Austrian business cycle theory; vector autoregression; impulse response; cointegration; B53; E32; E63 (search for similar items in EconPapers)
Date: 2016
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DOI: 10.1108/S1529-213420160000020008

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