Is There a Stable Money Demand Function under the Low Interest Rate Policy? A Panel Data Analysis

Hiroshi Fujiki, Cheng Hsiao and Yan Shen
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Yan Shen: U Southern CA

Monetary and Economic Studies, 2002, vol. 20, issue 2, pages 1-23

Abstract: We use annual Japanese prefecture data on income, population, demand deposits, and saving deposits from 1992 to 1997 to investigate the issue of whether there exists a stable money demand function under the low interest rate policy. The evidence appears to support the contention that there does exist a stable money demand function with long-run income elasticity greater than one for M2 and less than one for Ml. Furthermore , we find that Japan's money demand is sensitive to interest rate changes . However, there is no evidence of the presence of a liquidity trap.

JEL-codes: R11 E41 (search for similar items in EconPapers)
Date: 2002
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