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A Nonlinear Specification Of Demand For Narrow Money In Colombia

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  • Luis Eduardo Arango

    ()

  • Andrés González

    ()

Abstract

A nonlinear smooth transition regressíon (STR) model of the demand for narrow in Colombia is specified using montly data for cash, prices, the scale variable (industrial GDP), the interest rate and the rate of depreciation, within the single equation framework allowed by the data. In comparison with linear error correction model, the nonlinear specification is higly superior according to the statistics. The dynamics described by this model matches both the magnitudes and the behaviour of the aggregate demand for narrow money in Colombia during the sample period. (1980.5-1998.11).

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Bibliographic Info

Paper provided by BANCO DE LA REPÚBLICA in its series BORRADORES DE ECONOMIA with number 001894.

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Length: 26
Date of creation: 31 Oct 1999
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Handle: RePEc:col:000094:001894

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Keywords: Error correction;

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  1. Jack Carr & Michael R. Darby, 1977. "The Role of Money Supply Shocks in the Short-Run Demand for Money," UCLA Economics Working Papers, UCLA Department of Economics 098, UCLA Department of Economics.
  2. Lutkepohl, Helmut & Terasvirta, Timo & Wolters, Jurgen, 1999. "Investigating Stability and Linearity of a German M1 Money Demand Function," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 14(5), pages 511-25, Sept.-Oct.
  3. Akerlof, George A & Milbourne, Ross D, 1980. "The Short Run Demand for Money," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 90(363), pages 885-900, December.
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  7. Muscatelli, Vito Antonio & Spinelli, Franco, 1996. "Modeling Monetary Trends in Italy Using Historical Data: The Demand for Broad Money 1861-1990," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 34(3), pages 579-96, July.
  8. Milbourne, Ross, 1983. "Optimal Money Holding under Uncertainty," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 24(3), pages 685-98, October.
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  10. Timo Teräsvirta & Ann-Charlotte Eliasson, 2001. "Non-linear error correction and the UK demand for broad money, 1878-1993," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 16(3), pages 277-288.
  11. Wolters, Jürgen & Teräsvirta, Timo & Lütkepohl, Helmut, 1996. "Modelling the Demand for M3 in the unified Germany," Working Paper Series in Economics and Finance 113, Stockholm School of Economics.
  12. Jansen, Eilev S. & Teräsvirta, Timo, 1995. "Testing Parameter Constancy and super Exogeneity in Econometric Equations," Working Paper Series in Economics and Finance 53, Stockholm School of Economics.
  13. Eitrheim, Oyvind & Terasvirta, Timo, 1996. "Testing the adequacy of smooth transition autoregressive models," Journal of Econometrics, Elsevier, Elsevier, vol. 74(1), pages 59-75, September.
  14. Martha Misas & Hugo Oliveros, . "Cointegración, exogeneidad y Crítica de Lucas: Funciones de Demanda de Dinero en Colombia: Un ejercicio más," Borradores de Economia 075, Banco de la Republica de Colombia.
  15. Hendry, David F & Ericsson, Neil R, 1991. "An Econometric Analysis of U.K. Money Demand in 'Monetary Trends in the United States and the United Kingdom' by Milton Friedman and Anna Schwartz," American Economic Review, American Economic Association, American Economic Association, vol. 81(1), pages 8-38, March.
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  17. Roberto Steiner Sampedro, 1988. "La Demanda Por Medios De Pago, Efectivo Y Depositos En Cuenta Corriente: 1967-1986," ENSAYOS SOBRE POLÍTICA ECONÓMICA, BANCO DE LA REPÚBLICA - ESPE, BANCO DE LA REPÚBLICA - ESPE.
  18. David F. Hendry & Neil R. Ericsson, 1990. "Modeling the demand for narrow money in the United Kingdom and the United States," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 383, Board of Governors of the Federal Reserve System (U.S.).
  19. Cuthbertson, K, 1986. "Monetary Anticipations and the Demand for Money: Some UK Evidence," Bulletin of Economic Research, Wiley Blackwell, Wiley Blackwell, vol. 38(3), pages 257-70, September.
  20. Carr, Jack & Darby, Michael R. & Thornton, Daniel L., 1985. "Monetary anticipations and the demand for money: Reply to MacKinnon and Milbourne," Journal of Monetary Economics, Elsevier, Elsevier, vol. 16(2), pages 251-257, September.
  21. Lin, Chien-Fu Jeff & Terasvirta, Timo, 1994. "Testing the constancy of regression parameters against continuous structural change," Journal of Econometrics, Elsevier, Elsevier, vol. 62(2), pages 211-228, June.
  22. Andreas Beyer, 1998. "Modelling money demand in Germany," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 13(1), pages 57-76.
  23. Sarno, Lucio, 1999. "Adjustment Costs and Nonlinear Dynamics in the Demand for Money: Italy, 1861-1991," International Journal of Finance & Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 4(2), pages 155-77, April.
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Cited by:
  1. Hernández Monsalve, Mauricio A. & Posada Posada, Carlos Esteban, 2006. "La demanda por dinero en Colombia: un poco más de evidencia en el período reciente," PERFIL DE COYUNTURA ECONÓMICA, UNIVERSIDAD DE ANTIOQUIA - CIE.

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