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Abstract

In this study, we evaluate the spillover effects of the recent U.S. Federal Reserve’s purchase of long-term assets (quantitative easing) on prices of Canadian commodities. The first large-scale asset purchases happened after the Great Recession, at the end of 2008, and the second purchases were in November of 2010. Since the U.S. is a large country, those policies have international spillover effects, particularly on Canada, a major economic partner. The commodities included in this analysis are Canadian livestock (cattle, hogs, and poultry), cereal grains (corn, soybeans, and wheat), softs (sugar, coffee, and cocoa), and energy (crude oil and natural gas). Using historical decomposition graphs, we find significant spillover effects on the Canadian commodity prices under investigation in the immediate neighborhood (seven-month horizon) of the large-scale asset purchases, especially the second round of quantitative easing.

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