Money Demand in Canada

International Monetary Fund

No 1989/077, IMF Working Papers from International Monetary Fund

Abstract: The pace of financial market innovation in Canada quickened in the past decade or so with implications for the empirical relationships between the various monetary aggregates and other economic variables. Against this background, this paper, using an error correction formulation, presents new estimates of the demand functions for real M1, M2, and M2+ balances and concludes that while some reasonable well-behaved money demand functions exist, the interpretation of some of the variables, notably the Canadian Savings Bond variable, is open to question. The total interest elasticities of demand (i.e., including the own rate elasticity) are close to zero raising monetary management questions.

Keywords: WP; money demand; rate of return; dependent variable; opportunity cost; money demand equation; coefficient value; estimating equation; equation bias; representative equation; Demand for money; Monetary aggregates; Stocks; Personal income; Inflation (search for similar items in EconPapers)
Pages: 52
Date: 1989-01-01
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