Short-run Money Demand
Laurence Ball ()
Economics Working Paper Archive from The Johns Hopkins University,Department of Economics
This paper estimates a long-run demand function for M1, using U.S. data for 1959-1993. The paper interprets deviations from this long-run relation with Goldfeld=s partial adjustment model. A key innovation is the choice of the interest rate in the money demand function. Most previous work uses a short-term market rate, but this paper uses the average return on "near monies" -- close substitutes for M1 such as savings accounts and money market mutual funds. This approach yields a predicted path of M1 velocity that closely matches the data. The volatility of velocity after 1980 is explained by volatility in the returns on near monies.
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Journal Article: Short-run money demand (2012)
Working Paper: Short-Run Money Demand (2002)
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Persistent link: https://EconPapers.repec.org/RePEc:jhu:papers:481
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