Money demand function estimation by nonlinear cointegration
Youngsoo Bae () and
Robert de Jong
Journal of Applied Econometrics, 2007, vol. 22, issue 4, 767-793
Abstract:
Conventionally, the money demand function is estimated using a regression of the logarithm of money demand on either the interest rate or the logarithm of the interest rate. This equation is presumed to be a cointegrating regression. In this paper, we aim to combine the logarithmic specification, which models the liquidity trap better than a linear model, with the assumption that the interest rate itself is an integrated process. The proposed technique is robust to serial correlation in the errors. For the USA, our new technique results in larger coefficient estimates than previous research suggested, and produces superior out-of-sample prediction. Copyright © 2007 John Wiley & Sons, Ltd.
Date: 2007
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (40)
Downloads: (external link)
http://hdl.handle.net/10.1002/jae.915 Link to full text; subscription required (text/html)
http://qed.econ.queensu.ca:80/jae/2007-v22.4/ Supporting data files and programs (text/html)
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:jae:japmet:v:22:y:2007:i:4:p:767-793
Ordering information: This journal article can be ordered from
http://www3.intersci ... e.jsp?issn=0883-7252
DOI: 10.1002/jae.915
Access Statistics for this article
Journal of Applied Econometrics is currently edited by M. Hashem Pesaran
More articles in Journal of Applied Econometrics from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley-Blackwell Digital Licensing () and Christopher F. Baum ().