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Stabilization and nonfederal behaviour in an open federal State: An econometric study of the fixed exchange rate, Canadian Case

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Abstract

During their attempts at stabilization, the central authorities in a federal system often face the prospect of lack of co-operation by junior levels of government. In the context of a macroeconometric model of the Canadian economy, this paper presents a framework for assessing the importance of junior government behavior to the outcome of centrally directed stabilization policies. The results do not confirm the view that the success of these policies requires nonfederal government co-operation. Relatively extreme assumptions about discretionary nonco-operation by junior jurisdictions are needed to conclude stabilization by the central authorities would not work at all simply because of this lack of co-operation.

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Authors and Affiliations

  1. National Energy Board of Canada, and Dept. of Economics, Carleton University, K1S 5B6, Ottawa

    M. A. Sheikh & S. L. Winer

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  1. M. A. Sheikh
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  2. S. L. Winer
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Additional information

The research for this paper was completed while both authors were at the Economic Council of Canada. An earlier version of this paper was presented at the 1976 Annual Meeting of the Econometric Society held in Atlantic City, New Jersey. The authors are indebted toT. T. Schweitzer, N. Swan, Charles Freedman, John Sargent and members of the CANDIDE Project for comments on earlier drafts of the paper, and to Marg Willis for assistance in performing the calculations. The views expressed herein are those of the authors and do not in any way reflect the views of the institutions to which they are attached.

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Sheikh, M.A., Winer, S.L. Stabilization and nonfederal behaviour in an open federal State: An econometric study of the fixed exchange rate, Canadian Case. Empirical Economics 2, 195–211 (1977). https://doi.org/10.1007/BF01760399

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  • DOI: https://doi.org/10.1007/BF01760399

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