LONG-RUN MONEY DEMAND IN CANADA - IN SEARCH OF STABILITY

We search for a long-run cointegrating relationship among real money b alances, real income, and interest rates, extending the work of Ambler and Paquet (1990), who explore this issue in the Canadian context emp loying the methods of Engle and Granger (1987). First, we uncover para meter estimates of the cointegrated relationships using three differen t methods of estimation. Second, we employ the Hansen (1992) procedure to search for structural instability in cointegrating relationships w ith unknown break points. We find empirical support for a stable coint egrating relationship among real M1, real income, and short-term inter est rates in Canada for the period 1953:1-1990:4.