Financial Market Effects on Aggregate Money Demand: A Bayesian Analysis

Stuart Allen and Robert Connolly

Journal of Money, Credit and Banking, 1989, vol. 21, issue 2, 158-75

Abstract: This paper evaluates the extent to which aggregate data yield robust inferences about the linkages between financial market effects and aggregate M1 and M2 holdings. In particular, the authors investigate whether stock market returns, stock market volume, and a new brokerage costs measure affect money demand. They employ recent advances in Bayesian econometric methods to control for model specification uncertainty, and provide a complete sensitivity analysis of their results to alternative prior distributions. The impact of nonstationarity on inferences is briefly explored with an error correction model. Copyright 1989 by Ohio State University Press.

Date: 1989
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Persistent link: https://EconPapers.repec.org/RePEc:mcb:jmoncb:v:21:y:1989:i:2:p:158-75

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