Modelling the Demand for M3 in the unified Germany

Juergen Wolters, Timo Teräsvirta and Helmut Lütkepohl

No 113, SSE/EFI Working Paper Series in Economics and Finance from Stockholm School of Economics

Abstract: An error correction model for the demand for real M3 money is constructed for the period 1976-1994 with real GNP, the GNP deflator as well as a short-term and a long-term interest rate as explanatory variables. Quarterly, seasonally unadjusted data are used in estimating the model. It is found that there is a clear structural break due to the German unification in 1990. On the other hand, once this structural break is accounted for, a stable relation is found which passes a series of misspecification tests. In particular, a number of recent tests of parameter constancy and linearity are applied. Our specification is at variance with findings reported by some other researchers, notably the Deutsche Bundesbank.

Keywords: Econometric modelling; nonlinearity; parameter constancy; smooth transition regression; structural break (search for similar items in EconPapers)
JEL-codes: C52 E41 (search for similar items in EconPapers)
Pages: 19 pages
Date: 1996-04
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Citations: View citations in EconPapers (8)

Published in Review of Economics and Statistics , 1998, pages 399-409.

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Related works:
Journal Article: Modeling The Demand For M3 In The Unified Germany (1998)
Working Paper: Modelling the Demand for M3 in the Unified Germany (1996)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:hastef:0113

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