A Simultaneous-Equation Model of Money Demand and Money Supply for Canada

Yu Hsing, Abul M. M. Jamal

Department of Management & Business Administration, Southeastern Louisiana University, Hammond, USA.
Department of Marketing & Supply Chain Management, College of Business, Southeastern Louisiana University, Hammond, USA.

DOI: 10.4236/me.2013.41004                

Abstract

We estimate the money demand function and the money supply function for Canadasimultaneously by the three-stage least squares method. The inflation gap and the output gap are incorporated in the money supply function. Real money demand is positively affected by real GDP and negatively associated with the Treasury bill rate and the nominal effecttive exchange rate. Real money supply is positively influenced by the Treasury bill rate and negatively impacted by the inflation gap and the output gap.

Keywords

Money Demand; Money Supply; Three-Stage Least Squares

Conflicts of Interest

The authors declare no conflicts of interest.

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