Demand and supply functions for money in Canada: Some further evidence

The demand and supply functions for money in Canada are estimated in a simultaneous-equation model format in which the supply of money is considered endogenous. The results indicate that the important determinants of the demand for money are income, short-term interest rate and lagged real cash balance variables. Wealth is an unimportant explanatory variable in money demand thus rejecting the hypothesis that an increase in outside wealth increases the demand for money. The monetary base and cash reserve ratio are important explanatory variables in the money supply function and play a direct role in monetary control.