It Has Been Argued That Canada's Aggregate Output Growth and Unemployment

question 6

Essay

It has been argued that Canada's aggregate output growth and unemployment rates are very sensitive to United States economic fluctuations, while the opposite is not true.
(a)A researcher uses a distributed lag model to estimate dynamic causal effects of U.S. economic activity on Canada. The results (HAC standard errors in parenthesis)for the sample period 1961:I-1995:IV are: $\begin{aligned}\widehat { \text { urcan } _ { t } = } & - 1.42 + 0.717 \times \text { urust } + 0.262 \times \text { urust } - 1 + 0.023 \times \text { urust } - 2 - 0.083 \times \text { urust } - 3 \\& ( 0.83 ) ( 0.457 )\quad \quad ( 0.557 )\quad\quad\quad\quad\quad\quad\quad(0.398)\quad\quad\quad\quad\quad(0.405) \\& - 0.726 \times \text { urust } - 4 + 1.267 \times \text { urust } - 5 ; R 2 = 0.672 , \text { SER } = 1.444 \\& ( 0.504 ) \quad ( 0.385 )\end{aligned}$
where urcan is the Canadian unemployment rate, and urus is the United States unemployment rate.
Calculate the long-run cumulative dynamic multiplier.
(b)What are some of the omitted variables that could cause autocorrelation in the error terms? Are these omitted variables likely to uncorrelated with current and lagged values of the U.S. unemployment rate? Do you think that the U.S. unemployment rate is exogenous in this distributed lag regression?

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A U.S. federal law signed in 1882 that prohibited the immigration of Chinese laborers.

1882

The year notable for the enactment of the Chinese Exclusion Act in the United States, which was the first significant law restricting immigration into the United States.

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An employment broker or agent, often used historically to refer to one who exploited Italian and other immigrants in the United States by controlling their employment and living conditions.

Unskilled Workers

Individuals employed in a job that requires minimal training or education, often performing manual or menial tasks.