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The effect of foreign demand shocks on the Canadian economy: An analysis using QPM

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Abstract

Historically, rapid and unsustainable increases in the demand for goods and services originating within the economies of Canada's major trading partners have had a significant impact on the domestic economy. These episodes are typically characterized by increases in world commodity prices and by a tightening of monetary conditions abroad to contain inflationary pressures. In this article, the author uses the Bank's quarterly projection model (QPM) (described in the autumn 1994 issue of the Review) to trace the mechanisms that transmit these foreign developments throughout the Canadian economy. In addition, he outlines the response that is required from domestic monetary authorities to maintain a target rate of inflation.

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  • Benjamin Hunt, 1995. "The effect of foreign demand shocks on the Canadian economy: An analysis using QPM," Bank of Canada Review, Bank of Canada, vol. 1995(Autumn), pages 23-32.
    • Handle: RePEc:bca:bcarev:v:1995:y:1995:i:autumn95:p:23-32
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    1. Pierre Duguay & Stephen Poloz, 1994. "The Role of Economic Projections in Canadian Monetary Policy Formulation," Canadian Public Policy, University of Toronto Press, vol. 20(2), pages 189-199, June.
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    Cited by:

    1. René Lalonde & Zhenhua Zhu & Frédérick Demers, 2003. "Forecasting and Analyzing World Commodity Prices," Money Affairs, CEMLA, vol. 0(1), pages 1-30, January-J.
    2. Ben Hunt, 1999. "Inter-forecast monetary policy implementation: fixed-instrument versus MCI-based strategies," Reserve Bank of New Zealand Discussion Paper Series G99/1, Reserve Bank of New Zealand.

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    JEL classification:

    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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