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A Further Analysis of Exchange Rate Targeting in Canada

Listed author(s):
  • Robert A. Amano

    (Bank of Canada)

  • Tony S. Wirjanto

    (University of Waterloo)

In a recent paper Mercenier and Sekkat (1988) conclude that the Bank of Canada has followed a policy of exchange rate targeting using the money supply. We reexamine their results using a different estimation approach and with different assumptions about the forcing process of the exogenous variables. We also extend the sample period to include more recent observations. While we find some weak evidence to support their conclusion, the results, in general, suggest that the Bank of Canada has not used the money supply to target the Canada-U.S. exchange rate.

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Paper provided by EconWPA in its series Econometrics with number 9406001.

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Length: 29 pages
Date of creation: 22 Jun 1994
Date of revision: 22 Jun 1994
Handle: RePEc:wpa:wuwpem:9406001
Note: 29 printed pages, Compressed PostScript file. If you have trouble viewing the complete document, please print it out on a postscript printer. Other recent Bank of Canada working papers are listed on the last page of this report.
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  8. Mercenier, Jean & Sekkat, Khalid, 1988. "Money Stock Targeting and Money Supply: An Intertemporal Optimization Approach (with an Application to Canada)," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 3(3), pages 215-228, July-Sept.
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  14. Ogaki, M. & Park, Y.Y., 1989. "A Cointegration Approach To Estimating Preference Parameters," RCER Working Papers 209, University of Rochester - Center for Economic Research (RCER).
  15. Andrews, Donald W K, 1991. "Heteroskedasticity and Autocorrelation Consistent Covariance Matrix Estimation," Econometrica, Econometric Society, vol. 59(3), pages 817-858, May.
  16. Gregogy, A.W. & Pagan, A.R. & Smith, G.W., 1990. "Estimating Linear Quadratic Models With Integrated Processes," RCER Working Papers 247, University of Rochester - Center for Economic Research (RCER).
  17. Dolado, J. & Galbraith, J.W. & Banerjee, A., 1991. "Estimating Intertemporal Quadratic Adjustment Cost Models with Integrated Series," Economics Series Working Papers 99111, University of Oxford, Department of Economics.
  18. Phillips, P.C.B., 1986. "Testing for a Unit Root in Time Series Regression," Cahiers de recherche 8633, Universite de Montreal, Departement de sciences economiques.
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  20. Gregory, Allan W, 1994. "Testing for Cointegration in Linear Quadratic Models," Journal of Business & Economic Statistics, American Statistical Association, vol. 12(3), pages 347-360, July.
  21. Bilson, John F. O., 1979. "The deutsche mark/dollar rate : A monetary analysis," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 11(1), pages 59-101, January.
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