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Model selection for modeling the demand for narrow money in transitional economies

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  • Błażejowski, Marcin
  • Kufel, Paweł
  • Kufel, Tadeusz
  • Kwiatkowski, Jacek
  • Osińska, Magdalena

Abstract

The aim of this study was to verify the stability of monetary systems. Systems were measured by aggregate narrow money in selected emerging economies. The United Kingdom's economy was used as a benchmark. The Baumol-Tobin and Friedman monetary models were used as the theoretical basis for the for empirical error-correction models. A Bayesian averaging of classical estimates (BACE) approach was used to incorporate model uncertainty and select the best model. The results show that the monetary systems in 6 of the 11 economies were stable in the long run and that a set of factors changed in the short run. The robustness of the model selection based on the BACE procedure was strongly confirmed.

Suggested Citation

  • Błażejowski, Marcin & Kufel, Paweł & Kufel, Tadeusz & Kwiatkowski, Jacek & Osińska, Magdalena, 2018. "Model selection for modeling the demand for narrow money in transitional economies," MPRA Paper 90458, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:90458
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    Keywords

    model uncertainty; BACE; jointness; robust variables selection; gretl;

    JEL classification:

    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • P24 - Economic Systems - - Socialist Systems and Transition Economies - - - National Income, Product, and Expenditure; Money; Inflation

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