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Long-Run Money Demand in Canada: In Search of Stability


  • Haug, Alfred A
  • Lucas, Robert F


The authors search for a long-run cointegrating relationship among real money balances, real income, and interest rates, extending the work of Steve Ambler and Algin Paquet (1990), who explore this issue in the Canadian context employing the methods of Robert F. Engle and Clive W. Granger (1987). First, they uncover parameter estimates of the cointegrated relationships using three different methods of estimation. Second, the authors employ the Hansen (1992) procedure to search for structural instability in cointegrating relationships with unknown break points. They find empirical support for a stable cointegrating relationship among real M1, real income, and short-term interest rates in Canada for the period 1953:1-1990:4. Copyright 1996 by MIT Press.

Suggested Citation

  • Haug, Alfred A & Lucas, Robert F, 1996. "Long-Run Money Demand in Canada: In Search of Stability," The Review of Economics and Statistics, MIT Press, vol. 78(2), pages 345-348, May.
  • Handle: RePEc:tpr:restat:v:78:y:1996:i:2:p:345-48

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    References listed on IDEAS

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    1. Saten Kumar & Don J. Webber, 2013. "Australasian money demand stability: application of structural break tests," Applied Economics, Taylor & Francis Journals, vol. 45(8), pages 1011-1025, March.
    2. Brian M. Doyle, 2000. ""Here, dollars, dollars ..."estimating currency demand and worldwide currency substitution," International Finance Discussion Papers 657, Board of Governors of the Federal Reserve System (U.S.).
    3. Kumar, Saten & Rao, B. Bhaskara, 2012. "Error-correction based panel estimates of the demand for money of selected Asian countries with the extreme bounds analysis," Economic Modelling, Elsevier, vol. 29(4), pages 1181-1188.
    4. Georgopoulos, George J., 2006. "Estimating the demand for money in Canada: Does including an own rate of return matter?," The Quarterly Review of Economics and Finance, Elsevier, vol. 46(4), pages 513-529, September.
    5. Gerlach, Stefan. & Stuart, Rebecca, 2014. "Money demand in Ireland, 1933-2012," Research Technical Papers 08/RT/14, Central Bank of Ireland.
    6. Afees Salisu & Idris Ademuyiwa & Basiru Fatai, 2013. "Modelling the Demand for Money in Sub-Saharan Africa (SSA)," Economics Bulletin, AccessEcon, vol. 33(1), pages 635-647.
    7. Arize, A. C. & Shwiff, Steven S., 1998. "The appropriate exchange-rate variable in the money demand of 25 countries: an empirical investigation," The North American Journal of Economics and Finance, Elsevier, vol. 9(2), pages 169-185, December.
    8. Lee, Chien-Chiang & Chang, Chun-Ping, 2007. "The impact of energy consumption on economic growth: Evidence from linear and nonlinear models in Taiwan," Energy, Elsevier, vol. 32(12), pages 2282-2294.
    9. Ahtiala, Pekka & Kanto, Antti, 2002. "Contractionary effects of expansionary fiscal policy: theory and tests," Economic Modelling, Elsevier, vol. 19(1), pages 137-152, January.
    10. repec:kap:iaecre:v:4:y:1998:i:2:p:128-143 is not listed on IDEAS
    11. Arize, Augustine C. & Malindretos, John & Nam, Kiseok, 2010. "Cointegration, dynamic structure, and the validity of purchasing power parity in African countries," International Review of Economics & Finance, Elsevier, vol. 19(4), pages 755-768, October.
    12. Scott Hendry, 1995. "Long-Run Demand for M1," Macroeconomics 9511001, EconWPA.
    13. repec:kap:iaecre:v:9:y:2003:i:1:p:7-19 is not listed on IDEAS
    14. Chen, Show-Lin & Wu, Jyh-Lin, 2005. "Long-run money demand revisited: evidence from a non-linear approach," Journal of International Money and Finance, Elsevier, vol. 24(1), pages 19-37, February.
    15. Augustine Arize & Steven Shwiff, 1998. "The black market exchange rate and demand for money in sixteen developing countries," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 4(2), pages 128-143, May.
    16. Omer, Muhammad, 2009. "Stability of money demand function in Pakistan," MPRA Paper 35306, University Library of Munich, Germany.
    17. Lee, Chien-Chiang & Chen, Pei-Fen & Chang, Chun-Ping, 2007. "Testing linearity in a cointegrating STR model for the money demand function: International evidence from G-7 countries," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 76(4), pages 293-302.
    18. David O. Cushman, 2000. "The failure of the monetary exchange rate model for the Canadian-U.S. dollar," Canadian Journal of Economics, Canadian Economics Association, vol. 33(3), pages 591-603, August.
    19. Cushman David O., 2002. "Nonlinear Trends and Co-trending in Canadian Money Demand," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 6(1), pages 1-29, April.
    20. Augustine Arize & John Malindretos & Krishna Kasibhatla, 2003. "Does exchange-rate volatility depress export flows: The case of LDCs," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 9(1), pages 7-19, February.

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