Empirical Modelling of Money Demand in Periods of Structural Change: The Case of Greece
AbstractThis paper examines the behaviour of the demand for money in Greece during 1976:1-2000:4, a period that included many of the influences that cause money-demand instability. Two empirical methodologies, vector error correction (VEC) modelling and second-generation random coefficient (RC) modelling, are used to estimate the demand for money. The coefficients of both the VEC and RC procedures support the hypothesis that the demand for money becomes more responsive to both the own rate of return on money balances and the opportunity cost of holding money because of financial deregulation. In general, both procedures also support the hypothesis that the income elasticity of money demand declines over time as a result of technological improvements in the payments system and the development of money substitutes, which lead to economies of scale in holding money.
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Bibliographic InfoPaper provided by Bank of Greece in its series Working Papers with number 01.
Length: 33 pages
Date of creation: Feb 2003
Date of revision:
Publication status: Published in Oxford Bulletin of Economics and Statistics, 2003, 65 (5), pp. 605-628
Money demand; VEC; random coefficient estimation;
Other versions of this item:
- Sophocles N. Brissimis & George Hondroyiannis & P. A. V. B. Swamy & George S. Tavlas, 2003. "Empirical Modelling of Money Demand in Periods of Structural Change: The Case of Greece," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 65(5), pages 605-628, December.
- C20 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - General
- E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
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