Aggregation Bias in Estimating European Money Demand Functions
AbstractRecently, money demand functions for a group of European countries have been estimated and generally have been found to perform better than most national money demand functions. While parameter equality is a sufficient condition for valid aggregation of linear equations, in money demand estimation often log-linear specifications are used, so that aggregation is in effect nonlinear. This makes the relation between the aggregate and the individual equations more complicated. To investigate if the conditions for unbiased linear aggregation are also valid for logarithmic aggregation, a simulation study is performed.
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Bibliographic InfoPaper provided by University of Bonn, Germany in its series Discussion Paper Serie B with number 393.
Date of creation: Nov 1996
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Demand for Money; Nonlinear Aggregation; European monetary Union;
Find related papers by JEL classification:
- E47 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Forecasting and Simulation: Models and Applications
- C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
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