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A Nonlinear Specification Of Demand For Narrow Money In Colombia

  • Luis Eduardo Arango


  • Andrés González


A nonlinear smooth transition regressíon (STR) model of the demand for narrow in Colombia is specified using montly 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 higly 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 REPÚBLICA in its series BORRADORES DE ECONOMIA with number 001894.

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Length: 26
Date of creation: 31 Oct 1999
Date of revision:
Handle: RePEc:col:000094:001894
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  8. Lütkepohl, Helmut & Teräsvirta, Timo & Wolters, Jürgen, 1995. "Investigating Stability and Linearity of a German M1 Money Demand Function," SSE/EFI Working Paper Series in Economics and Finance 64, Stockholm School of Economics.
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