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 of Canadian 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.
Thanks are due to Professor William Thurber and Social Science Librarian Chelsie Lalonde, both of the University of Ontario Institute of Technology, and Professor Danny LeRoy of the University of Lethbridge, for assistance in gaining access to and interpreting the Canadian data. I also wish to thank an anonymous referee of the Advances in Austrian Economics for a close reading of an earlier version of this paper and for many helpful comments and criticisms.
Mulligan, R.F. (2016), "An Empirical Comparison of Canadian-American Business Cycle Fluctuations with Special Reference to the Phillips Curve", Studies in Austrian Macroeconomics (Advances in Austrian Economics, Vol. 20), Emerald Group Publishing Limited, Bingley, pp. 163-194. https://doi.org/10.1108/S1529-213420160000020008
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