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On the Reinterpretation of Money Demand Regressions

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  • Taylor, Mark P

Abstract

A stylized fact concerning estimated money demand relationships is that lagged dependent variables have high explanatory power and large estimated coefficients, which is hard to explain at a theoretical level. Marvin S. Goodfriend (1985) suggests that this may be due to the presence of serially correlated measurement errors in the independent variables. The author demonstrates how consistent estimates of the short-run demand function can be obtained even if the Goodfriend hypothesis is accepted and also how the hypothesis might be tested. Application of the suggested test using the Goldfeld (1973) data set leads to decisive rejection of the hypothesis. Copyright 1994 by Ohio State University Press.

Suggested Citation

  • Taylor, Mark P, 1994. "On the Reinterpretation of Money Demand Regressions," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 26(4), pages 851-866, November.
    • Handle: RePEc:mcb:jmoncb:v:26:y:1994:i:4:p:851-66
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    Cited by:

    1. Marvasti, A. & Smyth, David J., 1999. "The effect of barter on the demand for money: an empirical analysis," Economics Letters, Elsevier, vol. 64(1), pages 73-80, July.
    2. B. Bhaskara Rao & Rup Singh, 2006. "Demand for money in India: 1953-2003," Applied Economics, Taylor & Francis Journals, vol. 38(11), pages 1319-1326.
    3. B. Bhaskara Rao & Saten Kumar, 2009. "Cointegration, structural breaks and the demand for money in Bangladesh," Applied Economics, Taylor & Francis Journals, vol. 41(10), pages 1277-1283.
    4. Kevin S. Nell, 1999. "The Stability of Money Demand in South Africa, 1965-1997," Studies in Economics 9905, School of Economics, University of Kent.

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