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

question 32

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: t = -1.42 + 0.717 × urust + 0.262 × urust-1 + 0.023 × urust-2 - 0.083 × urust-3
(0.83)(0.457)(0.557)(0.398)(0.405)
- 0.726 × urust-4 + 1.267 × urust-5;R2= 0.672,SER = 1.444
(0.504)(0.385)
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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Definitions:

Ecological Fallacy

The error of making inferences about individuals based solely on aggregate data collected at the group level.

Meaningful Work

Employment perceived as having significance and purpose, contributing positively to the individual and society.

Workplace Spirituality

A framework where individuals connect to their inner selves while embracing their work tasks with a sense of purpose and meaning.

Shared Community

A group of individuals with common interests, values, or goals who collaborate and support each other.