This article investigates the effect of external, national, and sectoral shocks on Canadian employment fluctuations at the national, industrial, and provincial levels. We assume that employment growth in each industry-province pair depends on U.S. growth, lagged Canadian growth at the national, industrial, and provincial levels, an aggregate shock, and shocks specific to each industry, province, and industry-province pair. We estimate that the U.s. and Canadian shocks account for two-thirds and a quarter, respectively, of aggregate variation. Sectoral shocks account for only one-tenth of aggregate variation but represent 30% of the variation from Canadian sources.

This paper tests whether the August 1982 advent of the Latin American debt crisis affected the implicit value of commercial bank loans to major Latin American debtors and hence, the value of equities. In contrast to previous studies, the analysis provides an explicit derivation of the theoretical impact of such an effect, uses a more efficient pooled cross-sectional, time-series estimating technique, addresses the question of whether (ex ante) required returns on bank equities also were affected, and compares the estimates to the behavior of the direct market for Latin American bonds. The results imply that the crisis did cause significant debt discounting as well as an increase in required returns. However, unlike the bond market, most of this equity effect was delayed 6–9 months.

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This study constructs dynamic welfare measures for a system of futures markets that express the allocative efficiency of a particular market as a function of its accuracy and speed of adjustment following a shock to the system. The system comprises futures prices for T-bills, exchange rates (German mark, British pound, Canadian dollar and yen), and agricultural commodities (corn, wheat, and cotton) for delivery in 1981 and 1982. The results suggest that, although agricultural, exchange, and financial markets allover-react to a disturbance, agricultural markets do so to a much greater degree. Owing to their much greater size, however, the welfare loss arising from the overshooting is likely to be much larger for interest rate and exchange markets.

Cheng F. Lee, Chunchi Wu, K. C. John Wei, The Heterogeneous Investment Horizon and the Capital Asset Pricing Model: Theory and Implications, The Journal of Financial and Quantitative Analysis, Vol. 25, No. 3 (Sep., 1990), pp. 361-376