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Breaks in the UK Household Sector Money Demand Function

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  • Rakesh Bissoondeeal
  • Michail Karoglou
  • Andy Mullineux

Abstract

type="main"> We use non-parametric procedures to identify breaks in the underlying series of UK household sector money demand functions. Money demand functions are estimated using cointegration techniques and by employing both the S imple S um and D ivisia measures of money. P-star models are also estimated for out-of-sample inflation forecasting. Our findings suggest that the presence of breaks affects both the estimation of cointegrated money demand functions and the inflation forecasts. P-star forecast models based on D ivisia measures appear more accurate at longer horizons and the majority of models with fundamentals perform better than a random walk model.

Suggested Citation

  • Rakesh Bissoondeeal & Michail Karoglou & Andy Mullineux, 2014. "Breaks in the UK Household Sector Money Demand Function," Manchester School, University of Manchester, vol. 82, pages 47-68, December.
    • Handle: RePEc:bla:manchs:v:82:y:2014:i::p:47-68
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