Modelling the Demand for M3 in the unified Germany
AbstractAn error correction model for the demand for real M3 money is constructed for the period 1976-1994 with real GNP, the GNP deflator as well as a short-term and a long-term interest rate as explanatory variables. Quarterly, seasonally unadjusted data are used in estimating the model. It is found that there is a clear structural break due to the German unification in 1990. On the other hand, once this structural break is accounted for, a stable relation is found which passes a series of misspecification tests. In particular, a number of recent tests of parameter constancy and linearity are applied. Our specification is at variance with findings reported by some other researchers, notably the Deutsche Bundesbank.
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Bibliographic InfoPaper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 113.
Length: 19 pages
Date of creation: Apr 1996
Date of revision:
Publication status: Published in Review of Economics and Statistics , 1998, pages 399-409.
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Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
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Econometric modelling; nonlinearity; parameter constancy; smooth transition regression; structural break;
Other versions of this item:
- J. Wolters & T. Teräsvirta & H. Lütkepohl, 1996. "Modelling the Demand for M3 in the Unified Germany," SFB 373 Discussion Papers 1996,24, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
- E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
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