Long-Run Income and Interest Elasticities of Money Demand in the United States
AbstractEconometric techniques designed to accommodate nonstationary data are used to reexamine the stability of interest and income elasticities of money demand in the United States. Estimates based on postwar monthly data reveal a stable relationship between M1 velocity and various measures of interest rates that proxy the opportunity cost of holding money balances. Tests for the existence of cointegration and methods used to estimate the income and interest elasticities are based on procedures prescribed by Soren Johansen (1988). Corresponding error correction estimates offer insight as to the dynamics of the process that maintains the equilibrium relation between velocity and interest rates. Copyright 1991 by MIT Press.
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Bibliographic InfoArticle provided by MIT Press in its journal Review of Economics & Statistics.
Volume (Year): 73 (1991)
Issue (Month): 4 (November)
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Web page: http://mitpress.mit.edu/journals/
Other versions of this item:
- Dennis Hoffman & Robert H. Rasche, 1989. "Long-run Income and Interest Elasticities of Money Demand in the United States," NBER Working Papers 2949, National Bureau of Economic Research, Inc.
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