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The European Union GDP Forecast Rationality under Asymmetric Preferences

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Author Info

  • George A. Christodoulakis

    ()
    (Bank of Greece and Manchester Business School)

  • Emmanuel C. Mamatzakis

    (University of Athens and Ministry of Economy & Finance of Greece)

Abstract

This 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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File URL: http://www.bankofgreece.gr/BogEkdoseis/Paper200530.pdf
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Bibliographic Info

Paper provided by Bank of Greece in its series Working Papers with number 30.

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Length: 19 pages
Date of creation: Dec 2005
Date of revision:
Handle: RePEc:bog:wpaper:30

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Web page: http://www.bankofgreece.gr
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Related research

Keywords: Asymmetric Loss Preferences; Forecast Rationality; GDP Growth Forecasts; GMM Estimation; Lin-Lin.;

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Cited by:
  1. George S. Tavlas & P.A.V.B. Swamy, 2006. "The New Keynesian Phillips Curve and Inflation Expectations: Re-Specification and Interpretation," Working Papers 34, Bank of Greece.
  2. Hans Genberg, 2006. "Exchange-Rate Arrangements and Financial Integration in East Asia: On a Collision Course?," Working Papers 152006, Hong Kong Institute for Monetary Research.
  3. Alexandros E. Milionis, 2006. "An Alternative Definition of Market Efficiency and some Comments on its Empirical Testing," Working Papers 50, Bank of Greece.
  4. John Williamson, 2006. "A Worldwide System of Reference Rates," Working Papers 45, Bank of Greece.
  5. George A. Christodoulakis & Stephen E Satchell, 2006. "Exact Elliptical Distributions for Models of Conditionally Random Financial Volatility," Working Papers 32, Bank of Greece.
  6. Otmar Issing, 2006. "Europe's Hard Fix: The Euro Area," Working Papers 39, Bank of Greece.

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