Canadian Regional Cycles: The Quebec-Ontario Case Revisited.

Canadian economists have devoted some attention to the study of regional cycles. In the Quebec-Ontario case, the "wid ening" hypothesis has emerged as the empirical consensus: this hypot hesis states that the gap between the two regional economies increase s in a recessionary period. This paper reexamines this question using recent data and Bayesian vector autoregression models. The results o btained (monthly data on total employment, 1966-84) do not support th e prevailing position. A U.S. recession rapidly and strongly affects the Ontario economy while the impact on Quebec is much weaker. Conseq uently, a recession narrows the gap between the two provinces.