Exogeneity and Money Demand in a Small Open Economy: The Canadian Case

Allan Gregory and Michael McAleer

Working Paper from Economics Department, Queen's University

Abstract: This paper examines the issue of simultaneity in the money demand equation of a small open economy by analyzing the implications of alternative exchange rate regimes. When simultaneous-bias arises, its direction and magnitude are empirical issues. A structurally stable money demand equation is estimated using seasonally unadjusted quarterly Canadian data for 1956Q1-1978Q4. The overidentifying restrictions are supported by the data. Furthermore, the simultaneous equations bias is not statistically significant.

Pages: 25
Date: 1980
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Persistent link: https://EconPapers.repec.org/RePEc:qed:wpaper:401

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