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Money demand, the Cagan model, testing rational expectations vs adaptive expectations: The case of Turkey

Author

Listed:
  • Kivilcim Metin

    () (Department of Economics, Bilkent University, 06533 Ankara, Turkey)

  • Ilker Muslu

    () (Department of Economics, Bilkent University, 06533 Ankara, Turkey)

Abstract

This paper estimates the Cagan type demand for money function for Turkish economy during the period 1986:1-1995:3 and tests whether Cagan's specification fits the Turkish data using an econometric technique assuming that forecasting errors are stationary. This paper also tests the hypothesis that monetary policy was implemented in aiming to maximize the inflation tax revenue. Finally, the Cagan model is estimated with the additional assumption of rational expectations for Turkey for the considered period.

Suggested Citation

  • Kivilcim Metin & Ilker Muslu, 1999. "Money demand, the Cagan model, testing rational expectations vs adaptive expectations: The case of Turkey," Empirical Economics, Springer, vol. 24(3), pages 415-426.
  • Handle: RePEc:spr:empeco:v:24:y:1999:i:3:p:415-426
    Note: received: March 1998/final version received: October 1998
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    Citations

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    Cited by:

    1. Bilin Neyapti, 2013. "Turkey's experience with disinflation: where did all the welfare gains go?," Applied Economics Letters, Taylor & Francis Journals, vol. 20(7), pages 664-668, May.
    2. Artur Silva Lopes, 2006. "Deterministic seasonality in Dickey–Fuller tests: should we care?," Empirical Economics, Springer, vol. 31(1), pages 165-182, March.
    3. Hugo Benítez-Silva & Debra Dwyer & Wayne-Roy Gayle & Thomas Muench, 2008. "Expectations in micro data: rationality revisited," Empirical Economics, Springer, vol. 34(2), pages 381-416, March.
    4. Levent, Korap, 2006. "Seigniorage revenue and Turkish economy," MPRA Paper 20106, University Library of Munich, Germany.

    More about this item

    Keywords

    Adaptive expectations · cointegration · hyperinflation · inflation tax · money demand · rational expectations · unit root;

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General

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