Australasian money demand stability:Application of structural break tests

Don Webber and Saten Kumar
Additional contact information
Saten Kumar: Department of Business Economics, Auckland University of Technology and Department of Economics

No 1101, Working Papers from Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol

Abstract: Estimates of the demand for money provide important foundations for monetary policy setting but if the estimation technique does not explicitly account for structural changes then such estimates will be biased. This paper presents an investigation into the level and stability of money demand (M1) for Australia and New Zealand over the 1960-2009 period and demonstrates that both countries experienced regime shifts; Australia also experienced an intercept shift. Application of four time series methods provide consistent results with 1984 and 1998 break dates. CUSUM and CUSUMSQ stability tests reveal that M1 demand functions were unstable over the 1984 to 1998 period for both countries although tests for stability are not rejected thereafter.

Keywords: Money demand; Cointegration; Structural breaks; Australia; New Zealand (search for similar items in EconPapers)
JEL-codes: C22 E41 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2011-01
New Economics Papers: this item is included in nep-cba and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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http://carecon.org.uk/DPs/1101.pdf First version, 2011 (application/pdf)

Related works:
Journal Article: Australasian money demand stability: application of structural break tests (2013)
Working Paper: Australasian money demand stability: Application of structural break tests (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:uwe:wpaper:1101

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