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Structural Breaks, Cointegration and the Demand for Money in Greece

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  • Nikolaos Dritsakis

Abstract

: This paper investigates whether stable long-run money demand function for real narrow money exists in Greece over the period 2001:Q1-2010:Q4. To achieve this objective, the Johansen maximum likelihood procedure is used. Then, Gregory and Hansen tests are applied to test the possible structural breaks in money demand functions. To examine the existence of seasonal unit roots in quarterly data, the Hylleberg, Engle, Granger and Yoo (HEGY) test is used. The estimated results from the Johansen procedure show that there is no cointegration vector. On the other hand, Gregory-Hansen test for cointegration analysis supports the existence of one cointegration vector. Gregory and Hansen tests propose three structural breaks for the money demand function. These structural breaks occurred in 2008:Q3, 2009:Q1 and 2010:Q1. Furthermore, through the error correction model and CUSUM and CUSUMSQ tests, the stability of the money demand function is examined. The results show that in the case of Greece, money demand is unstable during the period under investigation (2001:Q1-2010:Q4).

Suggested Citation

  • Nikolaos Dritsakis, 2012. "Structural Breaks, Cointegration and the Demand for Money in Greece," The IUP Journal of Applied Economics, IUP Publications, vol. 0(3), pages 5-21, July.
    • Handle: RePEc:icf:icfjae:v:11:y:2012:i:3:p:5-21
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    Cited by:

    1. Nedialko Nestorov, 2015. "Cointegration Approach – Application Opportunities," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 1, pages 110-140.
    2. Félix Jiménez, 2018. "Capacidad productiva, cambio técnico y productividad: Estimaciones alternativas del producto de largo plazo," Documentos de Trabajo / Working Papers 2018-454, Departamento de Economía - Pontificia Universidad Católica del Perú.
    3. Olusegun A. Omisakin & Oluwatosin A. Adeniyi, 2014. "Structural Breaks and Finance-Driven Growth Hypothesis in ECOWAS: Further Empirical Evidence," International Journal of Business and Economic Sciences Applied Research (IJBESAR), International Hellenic University (IHU), Kavala Campus, Greece (formerly Eastern Macedonia and Thrace Institute of Technology - EMaTTech), vol. 7(3), pages 63-80, December.

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