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Is the US Demand for Money Unstable?

B. Rao and Saten Kumar

MPRA Paper from University Library of Munich, Germany

Abstract: The demand for money (M1) for the USA is estimated with annual data from 1960-2008 and its stability is analyzed with the extended Gregory and Hansen (1996b) test. In addition to estimating the canonical specification, alternative specifications are estimated which include a trend and additional variables to proxy the cost of holding money. Results with our extended specification showed that there has been a structural change in 1998 and the constraint that income elasticity is unity could not be rejected by subsample estimates. Short run dynamic adjustment equations are estimated with the lagged residuals from the fully modified OLS (FMOLS) estimates of cointegrating equation and also with the general to specific approach (GETS).

Keywords: Demand for M1; USA; Structural Breaks; Income Elasticity; Cost of Holding Money (search for similar items in EconPapers)
JEL-codes: E41 (search for similar items in EconPapers)
Date: 2009-06-14
New Economics Papers: this item is included in nep-mac
References: Add references at CitEc
Citations: View citations in EconPapers (3)

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https://mpra.ub.uni-muenchen.de/15715/1/MPRA_paper_15715.pdf original version (application/pdf)

Related works:
Journal Article: Is the US demand for money unstable? (2011) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:15715

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