Adapting to instability in money demand: forecasting money growth with a time-varying parameter model

Timothy Cogley ()

Economic Review, 1993, 35-41

Abstract: Conventional money demand models appear to be unstable, and this complicates the problem of conducting monetary policy. One way to deal with parameter instability is to learn how to adapt quickly when parameters shift. This paper applies a time-varying-parameter estimator to conventional money demand models and evaluates its usefulness as a forecasting tool. In relative terms, the time-varying-parameter estimator improves significantly on ordinary least squares. In absolute terms, we continue to have difficulty tracking money demand through turbulent periods.

Keywords: Monetary policy - United States; Money theory; Demand for money (search for similar items in EconPapers)
Date: 1993
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
https://www.frbsf.org/wp-content/uploads/93-3_35-41.pdf Full Text (text/html)
https://fraser.stlouisfed.org/title/economic-revie ... -money-demand-514292
https://fraser.stlouisfed.org/files/docs/publicati ... ev_frbsf_1993no3.pdf (application/pdf)

Related works:
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:fip:fedfer:y:1993:p:35-41:n:3

Ordering information: This journal article can be ordered from

Access Statistics for this article

More articles in Economic Review from Federal Reserve Bank of San Francisco Contact information at EDIRC.
Bibliographic data for series maintained by Federal Reserve Bank of San Francisco Research Library ().