A Closer Look at Long Run Money Demand

Alfred Haug and Julie Tam
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Julie Tam: Stanford University, USA

Working Papers from York University, Department of Economics

Abstract: We study annual United States data from 1869 or 1900 to 1999. We find evidence for a well-specified and stable model of money demand with data from 1946 to 1999. We carry out diagnostic and stability tests, including nonlinearity tests. A linear cointegration model with the monetary base performs better than a model with M1. A specification with M2 is not supported. We use real GNP as the scale variable and a short term interest rate as the opportunity cost measure. We estimate an income elasticity of .86 and an interest rate elasticity of -.44 for the monetary base.

JEL-codes: E41 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2001-11, Revised 2002-09
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Citations: View citations in EconPapers (2)

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http://dept.econ.yorku.ca/research/workingPapers/working_papers/Haug_Tam.pdf Revised version, 2002

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Persistent link: https://EconPapers.repec.org/RePEc:yca:wpaper:2002_09

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