A Systemic Approach to Money Demand Modeling
This paper uses a consumer theory-based systemic approach to model the demand for monetary liquid asset holdings. We implement the suggestions and caveats of aggregation theory for the estimation of a demand system for liquid assets (monies) in static, dynamic and time-varying parameters setups. Our results are robust and theoretically consistent with consumer theory restrictions, as system derived from a utility maximizing framework and a well-behaved utility function. In our estimations we find stability of interest-rate and total-expenditure elasticities, in contrast to previous literature. We also document evidence that long (short) maturity rates are associated to less (more) liquid assets and that the vigorous growth of M1 during the last five of years is not accounted for by low interest rates alone. Policy implications are straightforward; there is stable relationship between monies and interest rates, but the former do not respond exclusively to the latter.
|Date of creation:||Dec 2008|
|Contact details of provider:|| Postal: Casilla No967, Santiago|
Phone: (562) 670 2000
Fax: (562) 698 4847
Web page: http://www.bcentral.cl/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- William A. Barnett & Douglas Fisher & Apostolos Serletis, 2006.
"Consumer Theory and the Demand for Money,"
World Scientific Book Chapters,in: Money And The Economy, chapter 1, pages 3-43
World Scientific Publishing Co. Pte. Ltd..
- Barnett, William A & Fisher, Douglas & Serletis, Apostolos, 1992. "Consumer Theory and the Demand for Money," Journal of Economic Literature, American Economic Association, vol. 30(4), pages 2086-2119, December.
- Li, Gang & Song, Haiyan & Witt, Stephen F., 2006. "Time varying parameter and fixed parameter linear AIDS: An application to tourism demand forecasting," International Journal of Forecasting, Elsevier, vol. 22(1), pages 57-71.
- Orbe, Susan & Ferreira, Eva & Rodriguez-Poo, Juan, 2003. "An algorithm to estimate time-varying parameter SURE models under different types of restriction," Computational Statistics & Data Analysis, Elsevier, vol. 42(3), pages 363-383, March.
- Richard G. Anderson & Barry E. Jones & Travis D. Nesmith, 1996. "Monetary aggregation theory and statistical index numbers," Working Papers 1996-007, Federal Reserve Bank of St. Louis.
- Offenbacher, Edward K., 1980. "Economic monetary aggregates--comment," Journal of Econometrics, Elsevier, vol. 14(1), pages 55-56, September.
- Serletis, Apostolos, 1991. "Modeling the demand for consumption goods and liquid assets," Journal of Macroeconomics, Elsevier, vol. 13(3), pages 435-457. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:chb:bcchwp:512. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Claudio Sepulveda)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.