Regime Shifts in the Indicator Properties of Narrow Money in Canada
Financial innovations and the removal of the reserve requirements in the early 1990s have made the distinction between demand and notice deposits arbitrary. This classification issue has affected those narrow monetary aggregates (gross and net M1) that rely on a proper distinction for their definition, and may have eroded their value as indicators. The authors examine whether the indicator properties of various narrow aggregates for the growth of real output have changed over time. They find evidence of a regime shift in the relationship between real and narrow monetary aggregates and the growth of real output, which seems to have occurred in 1992. More specifically, their results show that real M1+, the definition of which is not based on the distinction between demand and notice deposits, has become a more useful indicator in predicting the growth of real output over the more recent period.
|Date of creation:||2006|
|Date of revision:|
|Contact details of provider:|| Postal: 234 Wellington Street, Ottawa, Ontario, K1A 0G9, Canada|
Phone: 613 782-8845
Fax: 613 782-8874
Web page: http://www.bank-banque-canada.ca/
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Norman R. Swanson & Jeffery D. Amato, 2000. "The real-time predictive content of money for output," BIS Working Papers 96, Bank for International Settlements.
- David Longworth & Joseph Atta-Mensah, 1995. "The Canadian Experience with Weighted Monetary Aggregates," Econometrics 9511001, EconWPA.
- James H. Stock & Mark W. Watson, 1987. "Interpreting Evidence on Money-Income Causality," NBER Working Papers 2228, National Bureau of Economic Research, Inc.
- Paul D. Gilbert & Lise Pichette, 2003. "Dynamic Factor Analysis for Measuring Money," Staff Working Papers 03-21, Bank of Canada.
- Francis X. Diebold & Robert S. Mariano, 1994.
"Comparing Predictive Accuracy,"
NBER Technical Working Papers
0169, National Bureau of Economic Research, Inc.
- Diebold, Francis X & Mariano, Roberto S, 1995. "Comparing Predictive Accuracy," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(3), pages 253-63, July.
- Diebold, Francis X & Mariano, Roberto S, 2002. "Comparing Predictive Accuracy," Journal of Business & Economic Statistics, American Statistical Association, vol. 20(1), pages 134-44, January.
- William Barnett, 2005.
- William Barnett, 2005. "Monetary Aggregation," WORKING PAPERS SERIES IN THEORETICAL AND APPLIED ECONOMICS 200510, University of Kansas, Department of Economics, revised Mar 2005.
- Davidson, Russell & MacKinnon, James G, 1981.
"Several Tests for Model Specification in the Presence of Alternative Hypotheses,"
Econometric Society, vol. 49(3), pages 781-93, May.
- Russell Davidson & James G. MacKinnon, 1980. "Several Tests for Model Specification in the Presence of Alternative Hypotheses," Working Papers 378, Queen's University, Department of Economics.
- Christis Hassapis, 2003. "Financial variables and real activity in Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 36(2), pages 421-442, May.
- Barnett, William A., 1980. "Economic monetary aggregates an application of index number and aggregation theory," Journal of Econometrics, Elsevier, vol. 14(1), pages 11-48, September.
- Hafer, R W & Kutan, A M, 1997. "More Evidence on the Money-Output Relationship," Economic Inquiry, Western Economic Association International, vol. 35(1), pages 48-58, January.
- Martin Feldstein & James H. Stock, 1993.
"The Use of Monetary Aggregate to Target Nominal GDP,"
NBER Working Papers
4304, National Bureau of Economic Research, Inc.
- Martin Feldstein & James H. Stock, 1994. "The Use of a Monetary Aggregate to Target Nominal GDP," NBER Chapters, in: Monetary Policy, pages 7-69 National Bureau of Economic Research, Inc.
- Robert B. Davies, 2002. "Hypothesis testing when a nuisance parameter is present only under the alternative: Linear model case," Biometrika, Biometrika Trust, vol. 89(2), pages 484-489, June.
- Sean Becketti & Charles S. Morris, 1992. "Does money matter anymore? A comment on Friedman and Kuttner," Research Working Paper 92-07, Federal Reserve Bank of Kansas City.
- Barry Cozier & Greg Tkacz, .
"The Term Structure and Real Activity in Canada,"
Staff Working Papers
94-3, Bank of Canada.
- Laidler, David, 1969. "The Definition of Money: Theoretical and Empirical Problems," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 1(3), pages 508-25, August.
- Stock, James H. & Watson, Mark W., 1989. "Interpreting the evidence on money-income causality," Journal of Econometrics, Elsevier, vol. 40(1), pages 161-181, January.
- Swanson, Norman R., 1998. "Money and output viewed through a rolling window," Journal of Monetary Economics, Elsevier, vol. 41(3), pages 455-474, May.
When requesting a correction, please mention this item's handle: RePEc:bca:bocawp:06-6. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.