International evidence on long-run money demand

Luca Benati (), Robert Lucas, Juan Pablo Nicolini and Warren Weber

Journal of Monetary Economics, 2021, vol. 117, issue C, 43-63

Abstract: A dataset comprising 38 countries and relatively long sample periods, which extend in some cases to over a century, is used to study the behavior of long-run demand for M1. For a large majority of the countries, the evidence supports the existence of a stable long-run relationship between the ratio of M1 to GDP and a short-term interest rate. The log-log specification provides a good characterization of the data, with the exception of periods featuring very low interest rates. An extension of the theory that imposes limits on the amount households can borrow results in a truncated log-log specification, which is in line with what we observe in the data. We estimate the interest rate elasticity to be between 0.3 and 0.6.

Keywords: Long-run money demand; Cointegration (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0304393220300866
Full text for ScienceDirect subscribers only

Related works:
Working Paper: International Evidence on Long-Run Money Demand (2019)
Working Paper: International Evidence on Long-Run Money Demand (2017)
Working Paper: International Evidence on Long Run Money Demand (2017)
Working Paper: International Evidence on Long Run Money Demand (2016)
Working Paper: International Evidence on Long Run Money Demand (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:moneco:v:117:y:2021:i:c:p:43-63

DOI: 10.1016/j.jmoneco.2020.07.003

Access Statistics for this article

Journal of Monetary Economics is currently edited by R. G. King and C. I. Plosser

More articles in Journal of Monetary Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().