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Japanese economic activity has been stagnant since the collapse of the speculative asset-price bubble in 1990, despite highly expansionary monetary policy which has brought interest rates down to record low levels. Although several reasons have been put forward to explain the sustained weakness of the Japanese economy, none is more intriguing from the viewpoint of a central bank than the possibility that monetary policy had been largely ineffective because the Japanese economy entered a Keynesian "liquidity trap."

In this paper two shocks are analysed using Canadian data: a money-supply shock ("M-shock") and an interest-rate shock ("R-shock"). Money-supply shocks are derived using long-run restrictions based on long-run propositions of monetary theory. Thus, an M-shock is represented by an orthogonalized innovation in the trend shared by money and prices.

This study evaluates the information content of 25 measures of credit with respect to three macroeconomic variables—nominal spending, real spending and prices. Initially, simple descriptive techniques are used to assess the contemporaneous and leading relationships between the credit aggregates and the three goal variables. Next, bivariate vector autoregression models are constructed by regressing each of […]

In this study the authors compare the information content of alternative monetary aggregates with respect to total spending in the economy, using data for Canada. The analysis considers 46 monetary measures, about half of which constitute conventional summation aggregates, while the remainder are superlative indices of monetary services based on the Fisher Ideal formula. The […]