Does a Cointegrating M2 Demand Relation Really Exist in the United States?

Ryuzo Miyao

Journal of Money, Credit and Banking, 1996, vol. 28, issue 3, 365-80

Abstract: This paper reexamines evidence on M2 demand cointegration in the postwar United States. Equilibrium relations between M2 and various sets of its determinants are analyzed using quarterly observations from 1959:1 to 1988:4, 1990:4, and 1993:4 based on three different testing methods. For earlier subsamples, mixed results are obtained suggesting both cointegration and no cointegration. For the full sample, however, virtually no evidence supports cointegration. Accordingly, a M2 error-correction model is no longer appropriate to investigate short-run dynamics of business fluctuations in the 1990s. Copyright 1996 by Ohio State University Press.

Date: 1996
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Persistent link: https://EconPapers.repec.org/RePEc:mcb:jmoncb:v:28:y:1996:i:3:p:365-80

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