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A Vector Error Correction And Nonnested Modelling Of Money Demand Function In Nigeria

  • Godwin Nwaobi

    (University of Abuja)

This paper examines the stability of the demand for money in nigeria. With relatively simple model specifying a vector valued autoregressive process(VAR), the hypothesis of the existence of cointegration vectors is formulated as the hypothesis of reduced rank of the longrun impact matrix. This enabled us to derive estimates and test statistics for the hypothesis of a given number of cointegration vectors. The money demand function was found to be stable and evidence gathered from the non- nested tests suggest that income is the more appropriate scale variable in the estimation of money demand function in nigeria.

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File URL: http://econwpa.repec.org/eps/em/papers/0111/0111004.pdf
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Paper provided by EconWPA in its series Econometrics with number 0111004.

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Length: 26 pages
Date of creation: 30 Nov 2001
Date of revision:
Handle: RePEc:wpa:wuwpem:0111004
Note: Type of Document - Acrobat pdf; prepared on IBM PC ; to print on HP; pages: 26 ; figures: included. This is an econometric modelling research work.
Contact details of provider: Web page: http://econwpa.repec.org

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  10. Pesaran, B. & Pesaran, M.H., 1992. "A Non-Nested Test of Level-Differenced versus Log-Differenced Stationary Models," Cambridge Working Papers in Economics 9222, Faculty of Economics, University of Cambridge.
  11. Pesaran, M H, 1974. "On the General Problem of Model Selection," Review of Economic Studies, Wiley Blackwell, vol. 41(2), pages 153-71, April.
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  13. Fisher, Gordon R. & McAleer, Michael, 1981. "Alternative procedures and associated tests of significance for non-nested hypotheses," Journal of Econometrics, Elsevier, vol. 16(1), pages 103-119, May.
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  15. Bennett T. McCallum & Marvin S. Goodfriend, 1987. "Money: Theoretical Analysis of the Demand for Money," NBER Working Papers 2157, National Bureau of Economic Research, Inc.
  16. Hendry, David F & Ericsson, Neil R, 1991. "An Econometric Analysis of U.K. Money Demand in 'Monetary Trends in the United States and the United Kingdom' by Milton Friedman and Anna Schwartz," American Economic Review, American Economic Association, vol. 81(1), pages 8-38, March.
  17. Godfrey, L. G. & Pesaran, M. H., 1983. "Tests of non-nested regression models: Small sample adjustments and Monte Carlo evidence," Journal of Econometrics, Elsevier, vol. 21(1), pages 133-154, January.
  18. Hendry, David F, 1985. "Monetary Economic Myth and Econometric Reality," Oxford Review of Economic Policy, Oxford University Press, vol. 1(1), pages 72-84, Spring.
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  21. Dr. Godwin Chukwudum Nwaobi, 2004. "Modelling Economic Fluctuations In Subsaharan Africa:A Vector Autoregressive Approach," Macroeconomics 0406008, EconWPA.
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