Long-Run Money Demand in Latin-American countries: A Nonestationary Panel Data Approach
AbstractCentral banks have long been interested in obtaining precise estimations of money demand given the fact that the evolution of money demand plays a key role over several monetary variables. I use Pedroni's (2002) Fully Modified Ordinary Least Square (FMOLS) to estimate the coefficients of the long-run money demand function for 15 Latin-American countries. The FMOLS technique pool information regarding common long-run relationships while allowing the associated short-run dynamics and fixed effects to be heterogeneous across different members of the panel. For this group of countries, I find evidence of a cointegrating money demand, an income elasticity of 0.94, and an interest-rate semi-elasticity of -0.01.
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Bibliographic InfoPaper provided by Banco Central de Reserva del Perú in its series Working Papers with number 2012-016.
Date of creation: Aug 2012
Date of revision:
Money demand; panel cointegration; FMOLS; Latin-American;
Find related papers by JEL classification:
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Longitudinal Data; Spatial Time Series
- E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-09-03 (All new papers)
- NEP-LAM-2012-09-03 (Central & South America)
- NEP-MON-2012-09-03 (Monetary Economics)
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