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What Have We Learned About Estimating the Demand for Money? a Multicountry Evaluation of Some New Approaches

Author

Listed:
  • Mr. George S Tavlas
  • Mr. James M. Boughton

Abstract

This paper provides estimates of the demand for both narrow and broad monetary aggregates for the five largest industrial countries using two recent approaches: buffer stock and error correction models. The performances of these models are compared with several versions of the conventional partial adjustment model. Tests are performed in order to evaluate the parameter stability, post-sample predictive ability, encompassing properties, and economic implications of the models. The results are encouraging with respect to the newer models, as they significantly outperform the traditional approach. It is found that the error correction model is especially promising as a general approach.

Suggested Citation

  • Mr. George S Tavlas & Mr. James M. Boughton, 1991. "What Have We Learned About Estimating the Demand for Money? a Multicountry Evaluation of Some New Approaches," IMF Working Papers 1991/016, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1991/016
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    Cited by:

    1. Ms. Grace B Li & Mr. Stephen A. O'Connell & Mr. Christopher S Adam & Mr. Andrew Berg & Mr. Peter J Montiel, 2016. "VAR meets DSGE: Uncovering the Monetary Transmission Mechanism in Low-Income Countries," IMF Working Papers 2016/090, International Monetary Fund.
    2. Monticelli, Carlo & Strauss-Kahn, Marc-Olivier, 1993. "European Integration and the Demand for Broad Money," The Manchester School of Economic & Social Studies, University of Manchester, vol. 61(4), pages 345-366, December.
    3. Renato Filosa, 1995. "Money demand stability and currency substitution in six European countries (1980-1992)," BIS Working Papers 30, Bank for International Settlements.
    4. James Boughton, 1992. "International comparisons of money demand," Open Economies Review, Springer, vol. 3(3), pages 323-343, October.

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