Empirical modeling of money demand

Ericsson, Neil R.

doi:10.1007/bf01294409

Cited by 101 publications

(48 citation statements)

References 51 publications

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“…A widely used specification of money demand is chosen as the starting point of the anlysis, see Ericsson (1998) and Beyer (2009 Price homogeneity is imposed as a long-run restriction to map the money demand analysis into a system of I(1) variables; see Holtemöller (2004). The income variable exerts a positive effect on nominal and real money balances.…”

Section: Specification Of Money Demandmentioning

confidence: 99%

Money Demand and the Role of Monetary Indicators in Forecasting Euro Area Inflation

Dreger

Wolters

2010

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. This paper examines the stability of money demand and the forecasting performance of a broad monetary aggregate (M3) in predicting euro area inflation. Excess liquidity is measured as the difference between the actual money stock and its fundamental value, the latter determined by a money demand function. The out-of sample forecasting performance is compared to widely used alternatives, such as the term structure of interest rates. The results indicate that the evolution of M3 is still in line with money demand even in the period of the financial and economic crisis. Monetary indi-cators are useful to predict inflation, if the forecasting equations are based on measures of excess liquidity. Terms of use: Documents in JEL:C22

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Section: Specification Of Money Demandmentioning

confidence: 99%

Money Demand and the Role of Monetary Indicators in Forecasting Euro Area Inflation

Dreger

Wolters

2010

SSRN Journal

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“…Following earlier works on the money demand function such as Arango and Nadiri (1981), Stock and Watson (1993), Ericsson (1998) and Mark and Sul (2003), the empirical model of the money demand can be summarized by the following function:…”

Section: Model Specification and Datamentioning

confidence: 99%

“…We could not use the interest rates on bonds, because central banks do not issue longer term financial instruments. We choose this variable because according to Ericsson (1998) long-run rates should not be included in the model for money demand when one uses the M1 monetary aggregate. Also, Komárek аnd Melecký (2001) suggest that the portfolio motive of holding such money plays only a minor role relative to the transaction motive.…”

Section: Model Specification and Datamentioning

confidence: 99%

The Stability of Long-Run Money Demand in Western Balkan Countries: An Empirical Panel Investigation

Kjosevski

Petkovski

Naumovska

2016

South East European Journal of Economics and Business

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“…We also consider the MM's money demand function to be limited in scope and assume a slightly more complex demand structure which follows Ericsson's (1998) commonly used money demand specification. This results in the functional relationship shown below…”

Section: Modifying the Mm's Money Demand Functionmentioning

confidence: 99%

The Current Account, the Spot Exchange Rate and the Demand for Money

Joseph¹,

Larrain²,

Ottoo³

2012

IJEF

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We derive a theoretical balance of payments current account model from a framework that assumes a monetary model of exchange rates as a first state of the world, but then presumes the existence of deviations from purchasing power parity. In such a model there is slow price adjustment where short-run exchange rates deviate from long-run equilibrium exchange rates. Under these conditions there are accumulations of net foreign assets due to current account imbalances. A nonlinear model results where there is dependence between exchange rate deviations from equilibrium and the current account, as well as a concurrent dependence of the current account on exchange rate deviations. Furthermore, the current account is also shown to depend on the demand for money. Thus the theoretical explanation of the current account is concomitant on the short-run exchange rate and the determinants of money demand.Keywords: Current account, Net foreign assets, Exchange rate deviation, Nonlinear monetary model, Money demand JEL Classification: E41; F31; F32. Current Account AnalysisCurrent account analysis has progressed from the elasticities and absorption approaches to the Mundell-Fleming framework, then to the Monetary, Intertemporal and Portfolio approaches. Our brief summary below will discuss the monetary model last, since it is used as a platform on which we build our own model. Current account models can be said to have begun with the trade analytics of elasticities and absorption approaches, followed by the expanded scope of the Mundell-Fleming model which included international capital flows and allowed monetary and fiscal policy analysis. Improving on both the short-term horizon and depth of the Mundell-Fleming model, the intertemporal approach assumes that the behavior of the current account reflects the intertemporal choices of economic agents. Basically the current account depends on intertemporal consumption which determines savings, and on the world-wide equality of the marginal product of capital which determines investment.

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Empirical modeling of money demand

Cited by 101 publications

References 51 publications

Money Demand and the Role of Monetary Indicators in Forecasting Euro Area Inflation

Money Demand and the Role of Monetary Indicators in Forecasting Euro Area Inflation

The Stability of Long-Run Money Demand in Western Balkan Countries: An Empirical Panel Investigation

The Current Account, the Spot Exchange Rate and the Demand for Money

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