Semi-non-parametric estimates of substitution for Canadian monetary assets Adrian R. Fleissig Department of Economics, California State University at Fullerton Apostolos Serletis Department of Economics, University of Calgary Abstract. We estimate the dynamic Fourier expenditure system to obtain consistent estimates of short-run and long-run Morishima elasticities of substitution for Canadian liquid assets. We argue that the variability of the estimated elasticities and evidence of less than perfect substitution between monetary assets interferes with the successful use of simple-sum aggre- gates and traditional log-linear money-demand functions. Calibrations semi-non-paramétriques de la substitution pour des actifs monétaires cana- diens. Les auteurs calibrent le système dynamique de dépenses à la Fourier pour obtenir des estimations cohérentes des élasticités de substitution à la Morishima à court et à long termes pour des actifs monétaires canadiens. Ils suggèrent que la variabilité des élasticités estimées et la constatation que la substitution n’est pas parfaite entre les actifs monétaires rendent difficile un usage heureux des agrégats de simple somme et des fonctions log-linéaires de demande de monnaie. 1. Introduction In recent years monetary aggregates constructed by the Bank of Canada have been sufficiently uninformative to provoke considerable concern about their usefulness in the conduct of monetary policy. The Bank has responded to this problem by revising existing definitions of the money stock or by proposing new definitions. Evidence of that is the recently introduced M1+ , M1++ and M 2++ monetary aggregates ~see Atta-Mensah and Nott 1999 for more details! and the fact that currently seven monetary aggregates are published in the Bank’s Review ~and are also available in CANSIM!: M1, M1+ , M1++ , M 2, M 2+ , M 2++ , and M 3. We thank two referees for their valuable suggestions andTerry Molik for research assistance. Serletis gratefully acknowledges financial support from the Social Sciences and Humanities Research Council of Canada. Email: Serletis@ucalgary.ca. Canadian Journal of Economics 0 Revue canadienne d’Economique, Vol. 35, No. 1 February 0 février 2002. Printed in Canada 0 Imprimé au Canada 0008-4085 0 02 0 78–91 0  Canadian Economics Association