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Economic policies and demand for money: evidence from Canada

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  • Amir Kia

Abstract

This study identifies Canadian fiscal and monetary policy regime changes that could influence the services of money. It is argued that if these policy regime changes were not incorporated in the estimation of demand for real balances, the resulting estimate would be biased and unstable. Using Canadian monthly data for the January 1975 to June 2001 period, the paper estimates a standard demand-for-money (M1) function with and without these policy regime changes. It was found the demand for money in Canada is stable over the short- and long-run periods when these policy regime changes are incorporated and the estimated coefficients have correct signs.

Suggested Citation

  • Amir Kia, 2006. "Economic policies and demand for money: evidence from Canada," Applied Economics, Taylor & Francis Journals, vol. 38(12), pages 1389-1407.
  • Handle: RePEc:taf:applec:v:38:y:2006:i:12:p:1389-1407
    DOI: 10.1080/00036840600684879
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    Cited by:

    1. Kia, Amir, 2010. "Overnight monetary policy in the United States: Active or interest-rate smoothing?," Journal of Macroeconomics, Elsevier, vol. 32(1), pages 378-391, March.
    2. Rakesh K. Bissoondeeal & Barry E. Jones & Jane M. Binner & Andrew W. Mullineux, 2010. "Household-Sector Money Demand For The Uk," Manchester School, University of Manchester, vol. 78(s1), pages 90-113, September.
    3. Tomáš Havránek & Jana Sedlaříková, 2014. "Meta-analýza důchodové elasticity poptávky po penězích
      [A Meta-Analysis of the Income Elasticity of Money Demand]
      ," Politická ekonomie, University of Economics, Prague, vol. 2014(3), pages 366-382.
    4. Kia, Amir, 2013. "Determinants of the real exchange rate in a small open economy: Evidence from Canada," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 23(C), pages 163-178.
    5. Baharumshah, Ahmad Zubaidi & Mohd, Siti Hamizah & Mansur M. Masih, A., 2009. "The stability of money demand in China: Evidence from the ARDL model," Economic Systems, Elsevier, vol. 33(3), pages 231-244, September.
    6. repec:ibn:ijefaa:v:9:y:2017:i:11:p:163-172 is not listed on IDEAS
    7. Kia, Amir & Darrat, Ali F., 2007. "Modeling money demand under the profit-sharing banking scheme: Some evidence on policy invariance and long-run stability," Global Finance Journal, Elsevier, vol. 18(1), pages 104-123.

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