MONEY DEMAND: THEORIES AND ESTIMATION METHODS. A FRACTIONAL COINTEGRATION APPLICATION

Anna Conte and Chiara Oldani

Economia, Societa', e Istituzioni, 2006, vol. XVIII, issue 3

Abstract: Money demand is an economic theme, which has fascinated economists over the centuries and no unique result has been ever reached. Money demand, and money allocation in portfolio depend on the definition of money and wealth and on the possible combinations, depending on technology available and risk attitude. This paper surveys theoretical and empirical approaches to the theme and addresses it using a different estimation technique from traditional papers (i.e. fractional cointegration). Futures represent the widest and biggest innovation of financial markets; modern monetary economics should include financial innovation in the money demand function since it contributes to provide stability. More in details, we are interested in the relationship among (real) money holdings, income, the interest rate (on Federal Funds), and Futures, which is not instantaneous.

Keywords: money demand; futures; time series; fractional cointegration; spectral analysis (search for similar items in EconPapers)
JEL-codes: C13 C22 E41 E44 (search for similar items in EconPapers)
Date: 2007-02
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