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Testing the Lucas critique for the Turkish money demand function

  • Yıldırım, Metin
  • Korap, Levent

This paper aims to test the prevalence of the Lucas critique by use of an applied modelling approach. The Turkish narrow money demand is chosen for investigation purposes and an extensive statistical-based econometric application has been carried out to observe whether the model in question has been exposed to the content of such a critique. The results confirm the theory to explain the behavioral foundations of aggregate monetary economics approaches and reveal that no evidence can be found in favor of the non-rejection of the Lucas critique that leads us to infer that the modelling attempt can be considered by the researcher a feedback model which is able to encompass a whole class of expectation models.

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File URL: https://mpra.ub.uni-muenchen.de/41156/1/MPRA_paper_41156.pdf
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 41156.

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Date of creation: 2012
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Publication status: Published in İktisat, İşletme ve Finans 27.318(2012): pp. 57-82
Handle: RePEc:pra:mprapa:41156
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  11. Robin L. Lumsdaine & David H. Papell, 1997. "Multiple Trend Breaks And The Unit-Root Hypothesis," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 212-218, May.
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  18. Hurn, A S & Muscatelli, V A, 1992. "Testing Superexogeneity: The Demand for Broad Money in the UK," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(4), pages 543-56, November.
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  21. Şenay ÜÇDOĞRUK, 1996. "Türkiye''de Para Talebi Modeli: Eşbütünleşme Analizi İlişkileri," Iktisat Isletme ve Finans, Bilgesel Yayincilik, vol. 11(126), pages 30-40.
  22. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
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  24. Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
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  26. Ozge Akinci, 2003. "Modeling the Demand for Currency Issued in Turkey," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 3(1), pages 1-25.
  27. 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.
  28. Erdal Ozmen, 1998. "Is currency seigniorage exogenous for inflation tax in Turkey?," Applied Economics, Taylor & Francis Journals, vol. 30(4), pages 545-552.
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