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| Author: | Moodley, R.D. Kerr, W.A. Gordon, D.V. |
| Title: | Has the Canada-US trade agreement fostered price integration? |
| Journal: | Weltwirtschaftliches Archiv
2000 : HEFT 2, VOL. 136:2, p. 334-354 |
| Index terms: | Trade agreements Prices Canada USA |
| Language: | eng |
| Abstract: | This paper assesses the Canada-U.S. Trade Agreement (CUSTA) from the perspective of market integration. Using monthly data on producer price indices and the exchange rate of both countries for the 1974:11996:1 period, a Johansen procedure is used to test for long-run equilibrium or cointegrated price system among the price series. In addition, to determine whether product markets are converging after the implementation of CUSTA, a Kalman filter or time-varying parameter analysis is used. Empirical evidence supports the conclusion that CUSTA did not cause price integration or convergence, rather for the two markets convergence and integration were well established prior to CUSTA. The success of CUSTA appears to be in maintaining Canadian access to the U.S. market in the face of rising U.S. protectionism. |
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