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Monetary anticipations and the demand for money

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  • MacKinnon, James G.
  • Milbourne, Ross D.

Abstract

It has been recently argued that unanticipated changes in nominal money supply affect real money demand, and empirical results appear to support this hypothesis. Unfortunately, the econometric techniques used yield severely biased and inconsistent estimates. This paper shows how valid estimates can be obtained and presents results using U.S. data which do not support the conclusions of earlier authors. We find that unanticipated money supply changes affect real money demand, but with the wrong sign, and that anticipated changes has no effect. A consistency test for all models employing the anticipated-unanticipated distinction is also proposed.
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Suggested Citation

  • MacKinnon, James G. & Milbourne, Ross D., 1984. "Monetary anticipations and the demand for money," Journal of Monetary Economics, Elsevier, vol. 13(2), pages 263-274, March.
    • Handle: RePEc:eee:moneco:v:13:y:1984:i:2:p:263-274
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    Cited by:

    1. Erwin W. Heri, 1988. "Money Demand Regressions and Monetary Targeting Theory and Stylized Evidence," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 124(II), pages 123-149, June.
    2. McAleer, Michael, 1995. "The significance of testing empirical non-nested models," Journal of Econometrics, Elsevier, vol. 67(1), pages 149-171, May.
    3. Michael D. Bordo & Ehsan U. Choudhri & Anna J. Schwartz, 1984. "Money Growth Variability and Money Supply Interdependence Under InterestRate Control: Some Evidence For Canada," NBER Working Papers 1480, National Bureau of Economic Research, Inc.
    4. Nicholas Apergis, 2001. "Reassessing the role of buffer stock money under oil price shocks," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 29(1), pages 20-30, March.
    5. James Boughton, 1992. "International comparisons of money demand," Open Economies Review, Springer, vol. 3(3), pages 323-343, October.

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