Is the US demand for money unstable?
Is the US demand for money unstable?
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Date
2011
Authors
Rao, BB
Kumar, S
Supervisor
Item type
Journal Article
Degree name
Journal Title
Journal ISSN
Volume Title
Publisher
Taylor & Francis (Routledge)
Abstract
The demand for money (M1) for the USA is estimated with annual data from 1960-2008 and its stability is analyzed with the extended Gregory and Hansen (1996b) test. In addition to estimating the canonical specification, alternative specifications are estimated which include a trend and additional variables to proxy the cost of holding money. Results with our extended specification showed that there has been a structural change in 1998 and the constraint that income elasticity is unity could not be rejected by subsample estimates. Short run dynamic adjustment equations are estimated with the lagged residuals from the fully modified OLS (FMOLS) estimates of cointegrating equation and also with the general to specific approach (GETS).
Description
Keywords
Demand for M1 , US , Structural breaks , Income elasticity , Cost of holding money
Source
Applied Financial Economics, vol.21(17), pp.1263 - 1272
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© 2011 Taylor & Francis. This is a preprint of an article whose final and definitive form has been published in the Applied Financial Economics and is available online at: www.tandfonline.com with the open URL of your article (see Publisher’s Version)