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.:
- Markku Lanne, 2004.
"Nonlinear dynamics of interest rate and inflation,"
- Simon M. Potter, 1999.
"Nonlinear time series modelling: an introduction,"
87, Federal Reserve Bank of New York.
- 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.
- 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 304-311, July.
- 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 Archive 1388, Iowa State University, Department of Economics.
- 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
- 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.
- 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.
- Søren Johansen & Rocco Mosconi & Bent Nielsen, 2000.
"Cointegration analysis in the presence of structural breaks in the deterministic trend,"
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.
- Katarina Juselius, 1998. "Changing monetary transmission mechanisms within the EU," Empirical Economics, Springer, vol. 23(3), pages 455-481.
- Ripatti, Antti, 1998. "Demand for money in inflation-targeting monetary policy," Scientific Monographs, Bank of Finland, number 1998_013.
- 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.
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 you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.