Investigating Stability and Linearity of a German M1 Money Demand Function
Helmut Lütkepohl (),
Timo Teräsvirta () and
No 64, SSE/EFI Working Paper Series in Economics and Finance from Stockholm School of Economics
Starting from a linear error correction model the stability and linearity of a German M1 moneyt demand function are investigated, applying smooth transition regression techniques. Using seasonally unadjusted data from 1961 (1) to 1990 (2) it is found that the money demand equation is both linear and stable. After extending the sampling period until 1994 (2) a clear structural instability due to the mnonetary unification 1 July 1990 is found and subsequently modelled.
Keywords: Error correction; German monetary unification; Nonlinearity; Smooth transition regression; Structural Change (search for similar items in EconPapers)
JEL-codes: C22 C52 E41 (search for similar items in EconPapers)
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Published in Journal of Applied Econometrics, 1999, pages 511-525.
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Journal Article: Investigating Stability and Linearity of a German M1 Money Demand Function (1999)
Working Paper: Investigating Stability and Linearity of a German M1 Money Demand Function (1995)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:hastef:0064
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