Is the Canadian Monetary Policy Endogenous? A Cliometric Analysis

Jean-Guy Loranger, Gerard Boismenu
A monetary and financial mid-term equilibrium model for an open economy is developed from the regulationist approach and estimated from Canadian quarterly time series over a long period of time (1947-1999). One important aspect is to make the interest rate endogenous through the balance of payment constraint. The other features of the model are a money supply-demand equation, a real wage price equation, a financial profitability constraint, an average profit rate, a final demand equation, and a
more » ... and equation, and a productivity equation. The different estimated specifications of the model show strong empirical evidence that a regulationist structural model fits well the Canadian data and that monetary policy, whether or not based on a policy rule, is endogenous in a mid-term growth model. An implicit monetary rule is deducted from the structural model. The complexity of the output parameter in such a rule makes it very different from other policy rules already surveyed by J.B. Taylor.
doi:10.12759/hsr.28.2003.4.214-241 fatcat:wec44ogzhbhctcsphnd27r4vhy