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A Nonlinear Specification of Demand for Narrow Money in Colombia

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  • Luis Eduardo Arango
  • Andrés González

Abstract

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).

Suggested Citation

  • Luis Eduardo Arango & Andrés González, 1999. "A Nonlinear Specification of Demand for Narrow Money in Colombia," Borradores de Economia 135, Banco de la Republica de Colombia.
    • Handle: RePEc:bdr:borrec:135
    DOI: 10.32468/be.135
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    References listed on IDEAS

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    Cited by:

    1. Hernández Monsalve, Mauricio A. & Posada Posada, Carlos Esteban, 2006. "La demanda por dinero en Colombia: un poco más de evidencia en el período reciente," Perfil de Coyuntura Económica, Universidad de Antioquia, CIE, July.

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    More about this item

    Keywords

    error correction; demand for money; target-bounds; buffer stocks; nonlinearity; smooth transition regression.;
    All these keywords.

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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