Cash Setting, the Call Loan Rate, and the Liquidity Effect in Canada
AbstractIn this paper, the authors use the vector autoregression method to examine the effects of monetary policy in Canada including the empirical evidence of the liquidity effect in particular. They use the excess cash reserves of the chartered banks and the surprise component of excess cash reserves as measures of liquidity. Shocks to monetary policy are measured by the orthogonalized innovations to the liquidity variables and by the orthogonalized innovations to the call loan rate. The authors find that the effects of these shocks conform to monetary policy shocks and the results support the presence of the liquidity effect in Canada.
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Bibliographic InfoArticle provided by Canadian Economics Association in its journal Canadian Journal of Economics.
Volume (Year): 30 (1997)
Issue (Month): 4 (November)
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Postal: Canadian Economics Association Prof. Steven Ambler, Secretary-Treasurer c/o Olivier Lebert, CEA/CJE/CPP Office C.P. 35006, 1221 Fleury Est Montréal, Québec, Canada H2C 3K4
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- Scott Hendry & Wai-Ming Ho & Kevin Moran, 2003. "Simple Monetary Policy Rules in an Open-Economy, Limited-Participation Model," Working Papers 03-38, Bank of Canada.
- Jeromin Zettelmeyer, 2000.
"The Impact of Monetary Policy on the Exchange Rate - Evidence from Three Small Open Economies,"
IMF Working Papers
00/141, International Monetary Fund.
- Zettelmeyer, Jeromin, 2004. "The impact of monetary policy on the exchange rate: evidence from three small open economies," Journal of Monetary Economics, Elsevier, vol. 51(3), pages 635-652, April.
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