Abstract:There is a vast amount of empirical evidence concerning the cointegrating relationship between money demand, some kind of interest rate and income. In contrast to this, short-run dynamics are still opaque. In the existing literature, the return to steady state is modeled quite differently. The range goes from simple error correction models to non-linear approaches.We herewith propose a method for considering not only disequilibria between money demand and its steady state for the last period only, but also for… Show more
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