GMM Estimates of Currency Substitution between the Canadian Dollar and the U.S. Dollar
AbstractThis paper investigates the empirical strength of currency substitution between the Canadian dollar and the U.S. dollar. Euler equations implied by a small, open economy, money-in-the-utility-function model are estimated and tested by Hansen's generalized method of moments procedure. The major empirical finding is that both the elasticity of currency substitution and the share of U.S. currency in the production of Canadian liquidity services are economically small even though the combined domestic and U.S. real balances appear to provide statistically significant economizing on transactions costs. Copyright 1994 by Ohio State University Press.
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Bibliographic InfoArticle provided by Blackwell Publishing in its journal Journal of Money, Credit and Banking.
Volume (Year): 26 (1994)
Issue (Month): 4 (November)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-2879
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