Which Road Leads to Stable Money Demand?

Barnett, William A.

doi:10.1111/j.1468-0297.1997.tb00017.x

Cited by 40 publications

(11 citation statements)

References 42 publications

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“…Examples of such approaches are Barnett (1983), Fisher and Fleissig (1997), and Drake, Fleissig, and Swofford (2003). Taken together, our results indicate that future research should build upon more sophisticated models that make full use of the relevant theory, as emphasized by Barnett (1997).…”

Section: Discussionmentioning

confidence: 74%

Forecasting with Monetary Aggregates: Recent Evidence for the United States

Elger

Jones

Nilsson

2006

Journal of Economics and Business

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Section: Discussionmentioning

confidence: 74%

Forecasting with Monetary Aggregates: Recent Evidence for the United States

Elger

Jones

Nilsson

2006

Journal of Economics and Business

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“…Those results also have been gathered together in survey articles and books. See, e.g., [8] and Chapter 7 of [5]. The results by all available methods of comparison overwhelmingly support Divisia over simple sum at each level of aggregation.…”

Section: Recent Literaturementioning

confidence: 87%

“…The Barnett Critique defined the "high road" in [8] to be research that insists on internal coherence (consistency) among data, theory, and econometrics. In contrast, along the "low road", researchers can play fast and loose with data, theory, and econometrics.…”

Section: The High Road Versus the Low Roadmentioning

confidence: 99%

The Barnett Critique

Barnett

Park

2021

Encyclopedia

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The Barnett critique states that there is an internal inconsistency between the theory that is implied by simple sum monetary aggregation (perfect substitutability among components) and the economic theory that produces the models within which those aggregates are used. That inconsistency causes the appearance of unstable demand and supply for money. The incorrect inference of unstable money demand has caused serious harm to the field of monetary economics.

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“…Therefore, in advanced and emerging economies, monetary policies have shifted from monetary-aggregates targeting to interest-rate targeting. Ultimately, the whole strand of literature on money demand is bifurcated into new Keynesian who de-emphasizes the role of money in the monetary policy (see inter alia Clarida et al, 1999;Romer, 2000;Woodford, 2008;Svensson, 2009) and new monetarists who focus on the role of money in the conduct of monetary policy (see inter alia McCallum, 1996;Barnett, 1997;Estrella and Mishkin, 1997;King, 2001;Friedman, 2003;Christiano et al, 2007;Nelson, 2008;Ball, 2012;Thornton, 2014).…”

Section: Introductionmentioning

confidence: 99%

The impact of economic uncertainty, stock market uncertainty and monetary uncertainty on money demand in India

Khan

Adil

Husain

2021

IJOEM

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PurposeThe purpose of the paper is to address money demand instability and investigate the impact of economic uncertainty, stock market uncertainty and monetary uncertainty on money demand in India over the period 2003Q1–2019Q4.Design/methodology/approachThe study checks the stationarity of the variables through standard unit root tests. Based on the mixed order of variables' integration, the authors adopt the autoregressive distributed lag (ARDL) model to confirm the cointegration and check the stability of the money demand function (MDF).FindingsThe findings confirm the presence of cointegration and reveal a well-specified MDF, which exhibits stable parameters. Besides the conventional variables, all forms of uncertainties emerge as the essential long-term determinants of money demand. Long-run findings show that people demand more money to avoid the future financial crunch amid high economic, monetary and stock market uncertainties.Practical implicationsThe paper recommends, based on the findings, incorporating the monetary aggregates in the monetary policy framework as one of the essential information variables to control the fluctuation in the price level under the current flexible inflation targeting (FIT) regime.Social implicationsThe findings also add to the knowledge of economic agents in terms of the overall response of individuals to changes in different forms of uncertainties, thereby helping to formulate their portfolios more diligently.Originality/valueThe current work is the first of its kind in the Indian context. The incorporation of uncertainty measures in the MDF adds to the existing knowledge on money demand.

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Which Road Leads to Stable Money Demand?

Cited by 40 publications

References 42 publications

Forecasting with Monetary Aggregates: Recent Evidence for the United States

Forecasting with Monetary Aggregates: Recent Evidence for the United States

The Barnett Critique

The impact of economic uncertainty, stock market uncertainty and monetary uncertainty on money demand in India

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