A Closer Look At Long-Run U.S. Money Demand: Linear Or Nonlinear Error-Correction With M0, M1, Or M2?
Abstract"We study annual U.S. data from 1869 or 1900 to 1999. We find evidence for a well-specified and stable model of money demand with data from 1946 to 1999. We carry out diagnostic and stability tests, including linearity tests. A linear error-correction model with the monetary base performs better than a model with M1. A specification with M2 is not supported. We use real gross national product as the scale variable and a short-term interest rate as the opportunity cost measure. We estimate an income elasticity of 0.86 and an interest rate elasticity of - 0.44 for the monetary base". ("JEL "E41) Copyright 2006 Western Economic Association International.
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Bibliographic InfoArticle provided by Western Economic Association International in its journal Economic Inquiry.
Volume (Year): 45 (2007)
Issue (Month): 2 (04)
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- E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
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