Evolving Dynamic Relationships Between the Money Supply and Food-Based Prices in Canada and the United States |
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Authors: | Bruno Larue Ronald A. Babula |
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Affiliation: | Assistant professor, Département d'Économie Rurale, UniversitéLaval, Sainte-Fey, Quebec.;Supervisory international Trade Analyst, Agriculture and Forest Products Division, U.S. International Trade Commission, Washington, D.C. |
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Abstract: | The objective of this paper is to analyze the relationships between the money supply and food-based prices (farm input, farm output, retail food prices) and shed some light on contradictory results in the literature by performing the analysis on two countries, testing and allowing for structural change, and decomposing long-run relationships in terms of speed of adjustment and adjustment amount. Money neutrality is rejected for all of the periods in both countries. However, some of the required conditions for money neutrality held temporarily in the U. S. This could be attributed to differences in policy-induced market signal distortions. In both countries, demand-pull forces have grown stronger, and the cost-push forces have grown weaker. In Canada, this is consistent with a growing and more concentrated retail sector exercising price leadership on farm input and farm output prices. |
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