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The European Union GDP Forecast Rationality under Asymmetric Preferences

George Christodoulakis () and Emmanuel Mamatzakis
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George Christodoulakis: Bank of Greece and Manchester Business School

No 30, Working Papers from Bank of Greece

Abstract: This paper examines the behaviour of the demand for money in Greece during 1976:1-2000:4, a period that included many of the influences that cause money-demand instability. Two empirical methodologies, vector error correction (VEC) modelling and second-generation random coefficient (RC) modelling, are used to estimate the demand for money. The coefficients of both the VEC and RC procedures support the hypothesis that the demand for money becomes more responsive to both the own rate of return on money balances and the opportunity cost of holding money because of financial deregulation. In general, both procedures also support the hypothesis that the income elasticity of money demand declines over time as a result of technological improvements in the payments system and the development of money substitutes, which lead to economies of scale in holding money.

Keywords: Asymmetric Loss Preferences; Forecast Rationality; GDP Growth Forecasts; GMM Estimation; Lin-Lin. (search for similar items in EconPapers)
JEL-codes: C1 C44 C53 E17 E27 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2005-12
New Economics Papers: this item is included in nep-for and nep-mac
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