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Long-Run Relations in Australian Monetary Data

Author

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  • Juselius, K.

Abstract

In this paper we address the question of how to derive a statistically well-defined empirical model and the closely related question of how to choose the observational variables. Since the data are nonstationary, the derived empirical model is based on the multivariate cointegration model. The autoregressive and the moving average form of this model are discussed in terms of long run relations and common trends driving the system with reference to Australian money demand data. The importance of correct specification of linear trends in the model is demonstrated. The testing of structural hypotheses is found to greatly facilitate the interpretation of the two-dimensional cointegration space and finally leads to a formulation of two cointegration relations which can be interpreted as reasonable proxies for "excess money" and "excess aggregate demand" respectively. For the money relation long run price and income homogeneity is tested and accepted.
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Suggested Citation

  • Juselius, K., 1991. "Long-Run Relations in Australian Monetary Data," Papers 238, Australian National University - Department of Economics.
    • Handle: RePEc:fth:aunaec:238
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    Cited by:

    1. Abbas Valadkhani, 2002. "Long- and short-run determinants of the demand for money in New Zealand: A cointegration analysis," New Zealand Economic Papers, Taylor & Francis Journals, vol. 36(2), pages 235-250.
    2. Michel Peytrignet & Christof Stahel, 1998. "Stability of money demand in Switzerland: A comparison of the M2 and M3 cases," Empirical Economics, Springer, vol. 23(3), pages 437-454.
    3. Gordon de Brouwer & Irene Ng & Robert Subbaraman, 1993. "The Demand for Money in Australia: New Tests on an Old Topic," RBA Research Discussion Papers rdp9314, Reserve Bank of Australia.
    4. Abbas Valadkhani, 2005. "Modelling Demand For Broad Money In Australia ," Australian Economic Papers, Wiley Blackwell, vol. 44(1), pages 47-64, March.

    More about this item

    Keywords

    econometric models ; money ; demand ; trends ; income;
    All these keywords.

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money

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