Modelling of Structural Changes in Demand for Money Cointegration Relations
In this paper the multivariate cointegration technique coupled with a smooth nonlinear trend of time is applied to model the demand for money. Unmodelled gradual structural changes in the cointegration parameters affect the specification of the cointegration relations so that the number of cointegrating vectors found by linear methodology is smaller than suggested by the economic theory. Here the demand for broad money in Finland during 1980–1996 is analysed. It turns out that, if the cointegrated VAR model is extended with a suitable nonlinear deterministic trend of time related to the intercept term, then the missing cointegration relation between broad money and the scale variable is found and the cointegration space can then be identified.
Volume (Year): 17 (2004)
Issue (Month): 2 (Autumn)
|Contact details of provider:|| Web page: http://www.taloustieteellinenyhdistys.fi|
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Katarina Juselius, 1998.
"Changing monetary transmission mechanisms within the EU,"
Springer, vol. 23(3), pages 455-481.
- Katarina Juselius, 1997. "Changing Monetary Transmission Mechanisms within the EU," Discussion Papers 97-18, University of Copenhagen. Department of Economics.
- Potter, Simon M, 1999.
" Nonlinear Time Series Modelling: An Introduction,"
Journal of Economic Surveys,
Wiley Blackwell, vol. 13(5), pages 505-28, December.
- Lanne, Markku, 2002. "Nonlinear dynamics of interest rate and inflation," Research Discussion Papers 21/2002, Bank of Finland.
- Ripatti, Antti & null, Pentti, 2001. "Vector Autoregressive Processes With Nonlinear Time Trends In Cointegrating Relations," Macroeconomic Dynamics, Cambridge University Press, vol. 5(04), pages 577-597, September.
- Carlo C. A. Winder & Martin M. G. Fase, 1998. "Wealth and the demand for money in the European union," Empirical Economics, Springer, vol. 23(3), pages 507-524.
- He, Changli & Teräsvirta, Timo & González, Andres, 2002.
"Testing parameter constancy in stationary vector autoregressive models against continuous change,"
SSE/EFI Working Paper Series in Economics and Finance
507, Stockholm School of Economics, revised 06 May 2004.
- Changli He & Timo Terasvirta & Andres Gonzalez, 2009. "Testing Parameter Constancy in Stationary Vector Autoregressive Models Against Continuous Change," Econometric Reviews, Taylor & Francis Journals, vol. 28(1-3), pages 225-245.
- repec:cup:macdyn:v:5:y:2001:i:4:p:577-97 is not listed on IDEAS
- Enders, Walter & Granger, C. W. J., 1998.
"Unit Root Tests and Asymmetric Adjustment with an Example Using the Term Structure of Interest Rates,"
Staff General Research Papers
1388, Iowa State University, Department of Economics.
- Enders, Walter & Granger, Clive W J, 1998. "Unit-Root Tests and Asymmetric Adjustment with an Example Using the Term Structure of Interest Rates," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(3), pages 304-11, July.
- Tom Doan, . "RATS programs to replicate Enders/Granger JBES(1998)on threshold unit roots," Statistical Software Components RTZ00054, Boston College Department of Economics.
- Markku Lanne, 2004.
"Nonlinear dynamics of interest rate and inflation,"
- Bent Nielsen & Soren Johansen & Rocco Mosconi, 2000.
"Cointegration analysis in the presence of structural breaks in the deterministic trend,"
Economics Series Working Papers
2000-W22, University of Oxford, Department of Economics.
- Søren Johansen & Rocco Mosconi & Bent Nielsen, 2000. "Cointegration analysis in the presence of structural breaks in the deterministic trend," Econometrics Journal, Royal Economic Society, vol. 3(2), pages 216-249.
- Bent Nielsen, 2000. "Cointegration Analysis in the Presence of Structural Breaks in the Deterministic Trend," Econometric Society World Congress 2000 Contributed Papers 1494, Econometric Society.
- Lin, Chien-Fu Jeff & Terasvirta, Timo, 1994. "Testing the constancy of regression parameters against continuous structural change," Journal of Econometrics, Elsevier, vol. 62(2), pages 211-228, June.
- Saikkonen, Pentti, 2001. "Consistent Estimation In Cointegrated Vector Autoregressive Models With Nonlinear Time Trends In Cointegrating Relations," Econometric Theory, Cambridge University Press, vol. 17(02), pages 296-326, April.
When requesting a correction, please mention this item's handle: RePEc:fep:journl:v:17:y:2004:i:2:p:63-72. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Editorial Secretary)
If references are entirely missing, you can add them using this form.