Investigating Stability and Linearity of a German M1 Money Demand Function
AbstractStarting from a linear error correction model (ECM) the stability and linearity of a German M1 money demand function are investigated, applying smooth transition regression techniques. Using seasonally unadjusted quarterly data from 1961(1) to 1990(2) it is found that the money demand equation considered is both linear and stable. After extending the sampling period until 1995(4) a clear structural instability due to the monetary unification on 1 July 1990 is found and subsequently modelled. A non-linear specification for the extended period is presented and discussed.
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Bibliographic InfoArticle provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.
Volume (Year): 14 (1999)
Issue (Month): 5 (Sept.-Oct.)
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Web page: http://www.interscience.wiley.com/jpages/0883-7252/
Other versions of this item:
- H. Lütkepohl & T. Teräsvirta & J. Wolters, 1995. "Investigating Stability and Linearity of a German M1 Money Demand Function," SFB 373 Discussion Papers 1995,57, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- Lütkepohl, Helmut & Teräsvirta, Timo & Wolters, Jürgen, 1995. "Investigating Stability and Linearity of a German M1 Money Demand Function," Working Paper Series in Economics and Finance 64, Stockholm School of Economics.
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models &bull Diffusion Processes
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
- E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
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