{
  "title": "The Demand for M1 in the United States: A Commenton Baba, Hendry, and Starr",
  "publication": "IMF Working Papers, March 1, 1993",
  "sourceUrl": "https://www.imf.org/en/publications/wp/issues/2016/12/30/the-demand-for-m1-in-the-united-states-a-commenton-baba-hendry-and-starr-1036",
  "canonical": "https://www.imf.org/en/publications/wp/issues/2016/12/30/the-demand-for-m1-in-the-united-states-a-commenton-baba-hendry-and-starr-1036",
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  "summary": "A recent paper by Baba, Hendry, and Starr presents an error-correction model of the demand for M1 in the United States, which shows a dramatic improvement in both fit and stability over earlier models.",
  "sections": [
    {
      "heading": "Summary and central purpose",
      "content": "- A recent paper by Baba, Hendry, and Starr presents an error-correction model of the demand for M1 in the United States that shows a dramatic improvement in both fit and stability over earlier models.\n- This note (James M. Boughton) estimates an alternative model with the same data set and draws two conclusions:\n  - The improvements are due more to the use of complex dynamics than to the introduction of variables representing financial innovation.\n  - Some of the economic properties reported are not robust with respect to minor changes in specification."
    },
    {
      "heading": "Major findings",
      "content": "- Improvements in fit and stability in the Baba, Hendry, and Starr model are attributed primarily to complex dynamics rather than the introduction of financial-innovation variables.\n- Certain economic properties reported in the original model lack robustness to minor specification changes."
    },
    {
      "heading": "Methodology and scope",
      "content": "- The note estimates an alternative model using the same data set as Baba, Hendry, and Starr.\n- The focus is on comparing model fit, stability, and the role of added variables representing financial innovation versus the role of model dynamics."
    },
    {
      "heading": "Subjects and keywords",
      "content": "- Subject: Demand for money, Financial services, Money, Short term interest rates\n- Keywords: Bhs equation, Bhs interest-rate effect, Bhs model, Demand for money, interest elasticity, Short term interest rates, standard error, steady-state elasticity, WP\n\n---\n\n\nSource: https://www.imf.org/en/publications/wp/issues/2016/12/30/the-demand-for-m1-in-the-united-states-a-commenton-baba-hendry-and-starr-1036"
    }
  ],
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    "Authors: James M. Boughton",
    "Published: March 1, 1993",
    "Series: IMF Working Papers",
    "DOI: https://doi.org/10.5089/9781451920963.001",
    "A recent paper by Baba, Hendry, and Starr presents an error-correction model of the demand for M1 in the United States that shows a dramatic improvement in both fit and stability over earlier models.",
    "This note (James M. Boughton) estimates an alternative model with the same data set and draws two conclusions:",
    "Improvements in fit and stability in the Baba, Hendry, and Starr model are attributed primarily to complex dynamics rather than the introduction of financial-innovation variables.",
    "Certain economic properties reported in the original model lack robustness to minor specification changes.",
    "The note estimates an alternative model using the same data set as Baba, Hendry, and Starr.",
    "The focus is on comparing model fit, stability, and the role of added variables representing financial innovation versus the role of model dynamics.",
    "Subject: Demand for money, Financial services, Money, Short term interest rates",
    "Keywords: Bhs equation, Bhs interest-rate effect, Bhs model, Demand for money, interest elasticity, Short term interest rates, standard error, steady-state elasticity, WP"
  ],
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