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Transactions demand for money, deregulation and stock exchanges

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  • Anne Mikkola

    (University of Rochester)

Abstract

In this paper money demand is estimated for the period 1983/1-1986/12 for which a market interest rate is available. It will also be studied whether the rapid increase in the total value of trading on the Helsinki Stock Exchange has had any impact on the transactions demand for money. The results give only slight support for the significance of the stock exchange variable as a determinant of money demand. The estimation is carried out using both levels and difference specification. Cointegrating variables and error correction -models are also tested. The results show that money demand can validly be estimated without lagged dependent variable. Hence, it is legitimate to assume that money demand adjusts more or less immediately in which case estimation in levels specification gives satisfactory results.

Suggested Citation

  • Anne Mikkola, 1989. "Transactions demand for money, deregulation and stock exchanges," Finnish Economic Papers, Finnish Economic Association, vol. 2(1), pages 31-38, Spring.
    • Handle: RePEc:fep:journl:v:2:y:1989:i:1:p:31-38
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    References listed on IDEAS

    as
    1. Plosser, Charles I. & Schwert*, G. William, 1978. "Money, income, and sunspots: Measuring economic relationships and the effects of differencing," Journal of Monetary Economics, Elsevier, vol. 4(4), pages 637-660, November.
    2. Field, Alexander J, 1984. "Asset Exchanges and the Transactions Demand for Money, 1919-29," American Economic Review, American Economic Association, vol. 74(1), pages 43-59, March.
    3. Hall, S G, 1986. "An Application of the Granger & Engle Two-Step Estimation Procedure to United Kingdom Aggregate Wage Data," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 48(3), pages 229-239, August.
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