The Demand for M1 in the United States: A Comment

James M Boughton

Economic Journal, 1993, vol. 103, issue 420, 1154-57

Abstract: A recent paper by Y. Baba, D. Hendry, and R. Starr (1992) presents an error-correction model of the demand for M1 in the United States, which shows a dramatic improvement in both fit and stability over earlier models. This note estimates an alternative model with the same data set and draws two conclusions: that the improvements are due more to the use of complex dynamics than to the introduction of variables representing financial innovation and that some of the economic properties are not robust with respect to minor changes in specification. Copyright 1993 by Royal Economic Society.

Date: 1993
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