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The Demand for Money in a Simultaneous-Equation Framework

  • A. M. M. Jamal

    ()

    (Southeastern Louisiana University)

  • Yu Hsing

    ()

    (Southeastern Louisiana University)

Registered author(s):

    This paper estimates the demand for money in the U.S. within a model where the money supply function is also considered simultaneously. The explanatory variables for the money demand function include a measure of the interest rate, real income and the exchange rate. The explanatory variables for the money supply function include the output gap and the inflation gap in addition to an interest rate. The parameters estimated for the two equations avoid being biased or inconsistent. The results should be useful to both macroeconomic researchers and policy makers.

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    File URL: http://www.accessecon.com/Pubs/EB/2011/Volume31/EB-11-V31-I2-P174.pdf
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    Article provided by AccessEcon in its journal Economics Bulletin.

    Volume (Year): 31 (2011)
    Issue (Month): 2 ()
    Pages: 1929-1934

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    Handle: RePEc:ebl:ecbull:eb-11-00325
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    1. Gregory C. Chow, 1966. "On the Long-Run and Short-Run Demand for Money," Journal of Political Economy, University of Chicago Press, vol. 74, pages 111.
    2. Robert J. Gordon, 1984. "The Short-Run Demand for Money: A Reconsideration," NBER Working Papers 1421, National Bureau of Economic Research, Inc.
    3. Arango, Sebastian & Ishaq Nadiri, M., 1981. "Demand for money in open economies," Journal of Monetary Economics, Elsevier, vol. 7(1), pages 69-83.
    4. Saving, Thomas R, 1971. "Transactions Costs and the Demand for Money," American Economic Review, American Economic Association, vol. 61(3), pages 407-20, June.
    5. Mohsen Bahmani-Oskooee & Hafez Rehman, 2005. "Stability of the money demand function in Asian developing countries," Applied Economics, Taylor & Francis Journals, vol. 37(7), pages 773-792.
    6. Klein, Benjamin, 1977. "The Demand for Quality-adjusted Cash Balances: Price Uncertainty in the U.S. Demand for Money Function," Journal of Political Economy, University of Chicago Press, vol. 85(4), pages 691-715, August.
    7. John B. Taylor, 1998. "An Historical Analysis of Monetary Policy Rules," NBER Working Papers 6768, National Bureau of Economic Research, Inc.
    8. Hoffman, Dennis L. & Rasche, Robert H. & Tieslau, Margie A., 1995. "The stability of long-run money demand in five industrial countries," Journal of Monetary Economics, Elsevier, vol. 35(2), pages 317-339, April.
    9. Sahar Bahmani & Ali Kutan, 2010. "How stable is the demand for money in emerging economies?," Applied Economics, Taylor & Francis Journals, vol. 42(26), pages 3307-3318.
    10. Hafer, R.W. & Jansen, D.W., 1990. "The Demand For Money In The United States: Evidence From Cointegration Tests," Papers 9010, Erasmus University of Rotterdam - Institute for Economic Research.
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