An Application of the Modern Quantity Theory to the Canadian Economy

Abstract

This study was originally intended to cover the years from 1900 until the present. Eventually, however, it became quite apparent that all the necessary data was not available for the years prior to 1926. Good data was not available until 1938. The main problem with using data from earlier years was that because of changes in methods of accounting and compilation, it is not at all comparable with the more recent data. From 1938 to 1966 however, these inconsistencies could be corrected by adjustment, and the results of adjustment seemed to be fairly accurate. There was, however, no point in beginning a yearly series of data with 1938, since the war years are ususl1y omitted in this type of analysis, and the resulting gap would more than offset the advantages gained by a few extra years of data. The best solution of the problem seemed to be to entirely abandon the idea of a long run yearly analysis and to use the quarterly data available from 1949 to 1966 in a short run analysis. This solution severely limits the variety and number of economic fluctuations under which the theory may be tested, but it does have the advantage of allowing a much more rigorous testing of the predictive power of the specific function than has been possible using yearly data.