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, 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: E41 R11 (search for similar items in EconPapers)
Date: 2002
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Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:ime:imemes:v:20:y:2002:i:2:p:1-23

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