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An Empirical Investigation of Money Demand: Evidence from a Cash-In-Advance Model

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  • Keith Sill

Abstract

This paper investigates the empirical performance of a cash-in-advance model of money demand in which the income velocity of money may be nonstationary. Generalized method of moments is used to estimate parameters from first-order conditions but, unlike much of the existing empirical work on money/asset pricing models, the Euler equations are not assumed to hold exactly. Instrumental variables methods are used to estimate the model parameters, with careful attention paid to the choice of valid instruments. The estimated parameters are used to solve the model and its predictions are compared with those of an unrestricted VAR.

Suggested Citation

  • Keith Sill, 1998. "An Empirical Investigation of Money Demand: Evidence from a Cash-In-Advance Model," Canadian Journal of Economics, Canadian Economics Association, vol. 31(1), pages 125-147, February.
  • Handle: RePEc:cje:issued:v:31:y:1998:i:1:p:125-147
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    Cited by:

    1. Singh, Sunny Kumar, 2016. "Currency demand stability in the presence of seasonality and endogenous financial innovation: Evidence from India," MPRA Paper 71552, University Library of Munich, Germany.

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