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Recent Developments in the Monetary Aggregates and Their Implications

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Narrow Money-Transactions Money The growth rate of the narrow monetary aggregates picked up in 1999, reflecting the expansion in economic activity and the stabilization of interest rates. The sharp acceleration of the narrow aggregates in recent months suggests buoyant growth in GDP in coming quarters. Signs of a possible rise in inflation are also emerging. Over the longer run, for inflation to remain in the Bank's 1 to 3 per cent target range, the growth of narrow money would have to slow down from its current pace. In 1999, the growth rate of M1 also began to converge with that of the other narrow aggregates, M1+ and M1++. This suggests that the influence of the special factors that have been affecting the growth rate of M1 has diminished. Broad Money-"Store of Value" Household savings represent deferred consumption, and therefore the broad monetary aggregate provides information about future spending and, hence, inflation. In 1999, the very broad measure of money, M2++, grew at much the same rate as it did in 1998. This outcome is in line with inflation remaining in the inflation-control target range over the next couple of years.

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  • Joseph Atta-Mensah, 2000. "Recent Developments in the Monetary Aggregates and Their Implications," Bank of Canada Review, Bank of Canada, vol. 2000(Spring), pages 3-10.
  • Handle: RePEc:bca:bcarev:v:2000:y:2000:i:spring00:p:3-10
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    Cited by:

    1. David Laidler & William B.P. Robson, 2004. "Two Percent Target: The Context, Theory, and Practice of Canadian Monetary Policy since 1991," C.D. Howe Institute Policy Studies, C.D. Howe Institute, number 20041, January.
    2. Erika Arraño G., 2006. "Agregados Monetarios: Nuevas Definiciones," Economic Statistics Series 53, Central Bank of Chile.
    3. Pierre L. Siklos & Andrew G. Barton, 2001. "Monetary aggregates as indicators of economic activity in Canada: empirical evidence," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 34(1), pages 1-17, February.
    4. Serletis, Apostolos & Rangel-Ruiz, Ricardo, 2005. "Microeconometrics and measurement matters: Some results from monetary economics for Canada," Journal of Macroeconomics, Elsevier, vol. 27(2), pages 307-330, June.

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