What Have We Learned About Estimating the Demand for Money? a Multicountry Evaluation of Some New Approaches
Summary:
This paper provides estimates of the demand for both narrow and broad monetary aggregates for the five largest industrial countries using two recent approaches: buffer stock and error correction models. The performances of these models are compared with several versions of the conventional partial adjustment model. Tests are performed in order to evaluate the parameter stability, post-sample predictive ability, encompassing properties, and economic implications of the models. The results are encouraging with respect to the newer models, as they significantly outperform the traditional approach. It is found that the error correction model is especially promising as a general approach.
Series:
Working Paper No. 1991/016
Subject:
Demand for money Financial institutions Monetary base Money National accounts Personal income Price elasticity Prices Stocks
English
Publication Date:
February 1, 1991
ISBN/ISSN:
9781451843309/1018-5941
Stock No:
WPIEA0161991
Pages:
38
Please address any questions about this title to publications@imf.org