Tests of Functional Forms, Currency Substitution, and Capital Mobility of Czech Money Demand Function
AbstractThe demand for real M2 in the Czech Republic is positively influenced by real output and negatively associated with the deposit rate, the koruna/euro exchange rate, and the euro interest rate. The coefficient of real output for the demand for real M1 is insignificant. Hence, depreciation of the koruna or a higher euro interest rate would help raise Czech real output. The Box-Cox transformation test shows that the log-linear form for real M1 and M2 demand cannot be rejected at the 5% level while the linear form for real M1 and M2 demand can be rejected at the 5% level. The CUSUM and CUSUMSQ tests show that parameters in the demand for both real M1 and M2 demand are stable. In comparison, real M2 is a better monetary aggregate.
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Bibliographic InfoArticle provided by University of Economics, Prague in its journal Prague Economic Papers.
Volume (Year): 2006 (2006)
Issue (Month): 4 ()
Postal: Editorial office Prague Economic Papers, University of Economics, nám. W. Churchilla 4, 130 67 Praha 3, Czech Republic
Find related papers by JEL classification:
- E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
- O52 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Europe
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