A Regime Shift in Long-Run Money Demand in the United States

Ryuzo Miyao

Kobe Economic & Business Review, 1998, vol. 42, 117-136

Abstract: This paper presents evidence for a regime shift in an equilibrium Ml demand relation in the postwar United States. It is first shown that there is no robust evidence for the presence of Ml cointegration from conventional cointegration tests that do not allow for a possible break in the cointegrating vector. Once a regime shift is taken into account, however, strong evidence for Ml cointegration emerges through a procedure proposed by Gregory and Hansen (1996). With the restriction of the unit income elasticity, test results consistently support the case for a shift in the interest semielasticity and the intercept. The breakpoint is estimated to be 1976. The estimate of the interest semielasiticity is -0.07 prior to the break and -0.02 after the break.

Keywords: Long-run money demand; Cointegration; Regime shift (search for similar items in EconPapers)
JEL-codes: E41 (search for similar items in EconPapers)
Date: 1998
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Persistent link: https://EconPapers.repec.org/RePEc:kob:review:feb1998::v:42:p:117-136

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