Modelling Structural Change in Money Demand Using a Fourier-Series Approximation

Ralf Becker, Walter Enders and Stan Hurn

No 67, Research Paper Series from Quantitative Finance Research Centre, University of Technology, Sydney

Abstract: The paper develops a simple method that can be used to test for a time-varying intercept and to approximate its form. The test is solidly grounded in asymptotic theory and has good small-sample properties. The methodology is based on the fact that a Fourier approximation can capture the variation in any absolutely integrable function of time. As such, it is possible to use successive applications of the test to "back-out" the form of the time-varying intercept. We illustrate the methodology using an extended example concerning the demand for money.

Keywords: structural break; fourier approximations; money demand (search for similar items in EconPapers)
JEL-codes: E24 E31 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2001-12-01
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Citations: View citations in EconPapers (3)

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