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A Nonlinear Specification of Demand for Narrow Money in Colombia

  • Luis Eduardo Arango

    ()

  • Andrés González

A nonlinear smooth transition regression(STR) model of the demand for narrow money in Colombia is specified using monthly data for cash, prices, the scale variable (industrial GDP), the interest rate and the rate of depreciation, within the single equation framework allowed by the data. In comparison with linear error correction model, the nonlinear specification is highly superior according to the statistics. The dynamics described by this model matches both the magnitudes and the behaviour of the aggregate demand for narrow money in Colombia during the sample period (1980.5-1998.11).

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Paper provided by Banco de la Republica de Colombia in its series Borradores de Economia with number 135.

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Handle: RePEc:bdr:borrec:135
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  17. Sarno, Lucio, 1999. "Adjustment Costs and Nonlinear Dynamics in the Demand for Money: Italy, 1861-1991," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 4(2), pages 155-77, April.
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  22. Timo Teräsvirta & Ann-Charlotte Eliasson, 2001. "Non-linear error correction and the UK demand for broad money, 1878-1993," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 277-288.
  23. Martha Misas & Hugo Oliveros, . "Cointegración, exogeneidad y Crítica de Lucas: Funciones de Demanda de Dinero en Colombia: Un ejercicio más," Borradores de Economia 075, Banco de la Republica de Colombia.
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