In this paper I apply the work of Abrams and Iossifov (2006) to monetary policy in canada to see if same political party affiliation is needed to produce evidence of political opportunism. After modifying their anaylsis to maintain consistency in the time series dimensions of their variables for Canada, I find both an error correction model and a Taylor rule of reformulation of their test generate evidence consistent with same party political opportunism, but only weakly so. On the other hand, I find also that more traditional indicators of political influence present even more convincing evidence of political dependence. In particular, the data suggest that the election of a Liberal party government, a decrease in the degree of political competition, and to a lesser extent, the election of a minority government all positively influence the expansiveness of Canadian monetary policy. In combination, these findings are consistent with the hypothesis that the Bank of Canada is less rather than more independent that is the Fed.
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Paper provided by Carleton University, Department of Economics in its series Carleton Economic Papers with number
07-02.
Find related papers by JEL classification: E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
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