Money Growth Variability and Money Supply Interdependence Under Interestrate Control: Some Evidence for Canada

43 Pages Posted: 19 Jun 2004 Last revised: 20 Jul 2010

See all articles by Michael D. Bordo

Michael D. Bordo

Rutgers University, New Brunswick - Department of Economics; National Bureau of Economic Research (NBER)

Ehsan U. Choudhri

Carleton University - Department of Economics

Anna J. Schwartz

City University of New York (CUNY); National Bureau of Economic Research (NBER) - NY Office

Date Written: September 1984

Abstract

Canada, like many countries, has recently experienced difficulties in achieving money growth stability and money supply independence. Based on the buffer-stock view of money-holding as well as the credit market approach to the money supply, this paper suggests that the problems have arisen from the Bank of Canada suse of an interestrate control mechanism.The paper argues that: (1) The short-run behavior of Canadian money grow this influenced by demand shifts in the Canadian credit market.(2)Movements in U.S. interest rates relative to the controlled Canadian interest rates are a key source of these shifts.The paper presents evidence on Canadian money supply and demand functions consistent with the foregoing explanation.

Suggested Citation

Bordo, Michael D. and Choudhri, Ehsan U. and Schwartz, Anna J., Money Growth Variability and Money Supply Interdependence Under Interestrate Control: Some Evidence for Canada (September 1984). NBER Working Paper No. w1480. Available at SSRN: https://ssrn.com/abstract=334299

Michael D. Bordo (Contact Author)

Rutgers University, New Brunswick - Department of Economics ( email )

New Brunswick, NJ
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ehsan U. Choudhri

Carleton University - Department of Economics ( email )

1125 Colonel By Drive
Ottawa, Ontario
Canada

Anna J. Schwartz

City University of New York (CUNY) ( email )

17 Lexington Avenue
New York, NY 10010
United States

National Bureau of Economic Research (NBER) - NY Office

365 Fifth Avenue, 5th Floor
New York, NY 10016-4309
United States
212-817-7957 (Phone)

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