Disintermediation and Monetary Transmission in Canada

Author/Editor:

Jorge Roldos

Publication Date:

March 1, 2006

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

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:

English

Publication Date:

March 1, 2006

ISBN/ISSN:

9781451863444/1018-5941

Stock No:

WPIEA2006084

Price:

$15.00 (Academic Rate:$15.00)

Format:

Paper

Pages:

35

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