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A Regime Shift in Long-Run Money Demand in the United States

Author

Listed:
  • Ryuzo Miyao

    (Kobe University)

Abstract

This paper presents evidence for a regime shift in an equilibrium Ml demand relation in the postwar United States. It is first shown that there is no robust evidence for the presence of Ml cointegration from conventional cointegration tests that do not allow for a possible break in the cointegrating vector. Once a regime shift is taken into account, however, strong evidence for Ml cointegration emerges through a procedure proposed by Gregory and Hansen (1996). With the restriction of the unit income elasticity, test results consistently support the case for a shift in the interest semielasticity and the intercept. The breakpoint is estimated to be 1976. The estimate of the interest semielasiticity is -0.07 prior to the break and -0.02 after the break.

Suggested Citation

  • Ryuzo Miyao, 1998. "A Regime Shift in Long-Run Money Demand in the United States," Kobe Economic & Business Review, Research Institute for Economics & Business Administration, Kobe University, vol. 42, pages 117-136, February.
    • Handle: RePEc:kob:review:feb1998::v:42:p:117-136
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    More about this item

    Keywords

    Long-run money demand; Cointegration; Regime shift;
    All these keywords.

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money

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