Canadian and U.S. unemployment rates moved together within a narrow margin from 1961 to the mid-1970s. Since then, Canadian rates have exceeded U.S. rates by large margins-at times as much as 3 percentage points. Throughout this period, interest rates in the two countries have been nearly identical. Aggregate demand stimulation by government deficits has been greater in Canada than in the U.S., and the trade surplus in Canada has added to demand while the trade deficit in the U.S. has subtracted from demand. Therefore, it seems that conventional Keynesian arguments cannot explain the recent differences in unemployment rates. Copyright 1988 Western Economic Association International.
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