Disintermediation and Monetary Transmission in Canada

 
Author/Editor: Roldos, Jorge
 
Publication Date: March 01, 2006
 
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Summary: This paper studies changes in Canada's monetary policy transmission, associated with the important changes in financial structure experienced in the 1990's, using two methodologies. First, VAR models show a clear break in monetary transmission beginning in 1988, after changes in financial regulation initiated the process of financial disintermediation. Second, estimates of the interest rate elasticity of aggregate demand in IS equations increase in the 1990's, suggesting that the systematic component of monetary policy has become more relevant. The ratio of direct to indirect finance, a measure of disintermediation, contributes to explain changes in the interest rate elasticity, suggesting an increased effectiveness of monetary policy associated with a larger use of market-based sources of finance.
 
Series: Working Paper No. 06/84
Subject(s): Canada | Economic models | Financial intermediation | Monetary policy

Author's Keyword(s): Transmission of monetary polcy | vector autoregression | New Keynesian models
 
English
Publication Date: March 01, 2006
ISBN/ISSN: 0 / 1934-7073 Format: Paper
Stock No: WPIEA2006084 Pages: 35
Price:
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