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Monetary aggregates as indicators of economic activity in Canada: empirical evidence

  • Pierre L. Siklos
  • Andrew G. Barton

Empirical evidence linking monetary aggregates to variables such as inflation and economic growth has weakened over the past two decades. In this study we re-examine these relationships by creating composite monetary aggregates that switch among existing monetary aggregates, using quarterly data over the sample 1971-99. Overall, composite monetary aggregates appear to be useful in explaining or forecasting short-run movements in GDP growth and inflation. Also, the most successful composite monetary aggregates produce switch dates that overlap with the introduction of financial innovations. These subsequently prompted the Bank of Canada to revise or introduce new monetary aggregates.

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Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 34 (2001)
Issue (Month): 1 (February)
Pages: 1-17

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Handle: RePEc:cje:issued:v:34:y:2001:i:1:p:1-17
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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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