The stability of long-run money demand in five industrial countries

Hoffman, Dennis L.; Rasche, Robert H.; Tieslau, Margie

doi:10.1016/0304-3932(95)01189-u

Cited by 136 publications

(95 citation statements)

References 18 publications

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“…However, in the recent past, this view has changed, since a number of empirical studies using different data definitions and econometric methodology have been successful in finding stable demand relations. These include among others, Carlson et al (2000) for the US, Hendry and Ericsson (1991) for the UK and Hoffman et al (1995) for the US, Japan, Canada, the UK, and Germany.…”

Section: Introductionmentioning

confidence: 99%

Demand For Money: Implications for The Conduct of Monetary Policy in Kenya

Sichei¹,

Kamau²

2012

IJEF

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The paper analyses demand for different monetary aggregates (M0, M1, M2 and M3) in Kenya for the period 1997:4-2011:2. Dynamic frameworks are used to estimate and uncover parsimonious and empirically stable demand for money functions. Price, real GDP, nominal 91-Day Treasury bill rate, nominal interbank rate, nominal deposit rate and foreign interest rate affected the long-run demand for money functions to different degrees. The demand for money functions is found to be unstable over the period for the parameter values, implying that the current monetary targeting policy framework is inappropriate. However, there are challenges in adopting an alternative monetary policy framework.

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Section: Introductionmentioning

confidence: 99%

Demand For Money: Implications for The Conduct of Monetary Policy in Kenya

Sichei¹,

Kamau²

2012

IJEF

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“…As for the stability of money demand as an important assumption behind the viability of the Mankiw-Summers model, evidence for the stability of long-run demand functions for the M1 money aggregate is obtained for the US, Japan, Canada, UK and West Germany (Hoffman, Rasche & Tieslau 1995), as well as for seven East European countries (Bahmani & Kutan 2010) and four South Asian countries (Narayan, Narayan & Mishra 2009). …”

Section: Theoretical Frameworkmentioning

confidence: 99%

Fiscal Policy Effects in Ukraine

Shevchuk

Kopych

2018

AOC

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This paper empirically analyses fiscal policy effects in Ukraine using different identification strategies within the framework of a vector error correction model (VECM). For quarterly data from 2001 to 2016, we find a robust positive impact of both government expenditure and net revenue upon output in Ukraine, which closely corresponds with the predictions of the Mankiw-Summers model in the case of high demand for money in relation to consumption expenditure combined with significant investment elasticity in relation to the interest rate. In other respects, the fiscal policy transmission mechanism exhibits several standard features (such as an increase in government expenditure after a positive shock to revenue or a widening of the budget deficit following an interest rate hike). The results suggest the feasibility of revenue--based fiscal consolidation policies in Ukraine, as better tax collection may contribute to economic growth even in the short run. Since there is a robust conventional inverse relationship between interest rate and output, one of the puzzling results is that government expenditure puts downward pressure on the former, with net revenues being neutral in this respect. Real exchange rate (RER) depreciation is behind the decrease in output in the baseline model, but alternative identification schemes suggest that it is likely to be contractionary in the short run while turning expansionary in the long run.

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“…The first is for cointegration rank four Table 6 Horvath This evidence bolsters the case for the three vectors already revealed in the univariate analysis. We regard this as important, since we consistently have found evidence for a velocity vector in lower dimensional systems (Hoffman and Rasche, 1991;Hoffman, Rasche and Tieslau, 1995;Hoffman and Rasche, 1996a). The critical values for this test statistic at the 10 percent, five percent, and one percent levels are 38.75.…”

Section: The Case For Cointegrationmentioning

confidence: 99%

“…Hoffman and Rasche (1991), Johansen and Juselius (1990), Baba, Hendry, and Starr (1992), Stock and Watson (1993), and Lucas (1994) among others present evidence on the stationarity of money demand relations. This is sometimes estimated as a velocity relation that links income velocity to movements in a measure of nominal interest rates as in Hoffman, Rasche and Tieslau (1995). Mishkin (1992) and Crowder and Hoffman (1996) present evidence of a Fisher equation, while Shiller (1987, 1988) have examined cointegration between interest rates of assets with different terms to maturity.…”

Section: Testing For Cointegrationmentioning

confidence: 99%