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On the Stability of the Japanese Money Demand Function: Estimation Results Using the Error Correction Model

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  • Tomoo Yoshida

    (Economist, Research Division 1, Institute for Monetary and Economic Studies, Bank of Japan)

Abstract

Until recently, empirical studies on Japan's money demand function, like those in other countries, often revealed its instability. In this paper, Japan's money demand function is reestimated both with the conventional partial adjustment (PA) model and with the up-and-coming error correction model (ECM). The latter results showed that a quite stable money demand function in fact existed for more than two decades. This finding seems to put some weight on the argument that "missing money" phenomena are largely due to specification errors. Some account on the ECM will be also provided in this paper both in the context of British econometrics and recent developments in time series analysis.

Suggested Citation

  • Tomoo Yoshida, 1990. "On the Stability of the Japanese Money Demand Function: Estimation Results Using the Error Correction Model," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 8(1), pages 1-48, January.
    • Handle: RePEc:ime:imemes:v:8:y:1990:i:1:p:1-48
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    Cited by:

    1. Maria Soledad Martinez Peria, 2002. "The Impact of Banking Crises on Money Demand and Price Stability," IMF Staff Papers, Palgrave Macmillan, vol. 49(3), pages 1-1.
    2. Hiroshi Fujiki, 2014. "Japanese Money Demand from the Regional Data: An Update and Some Additional Results," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 32, pages 45-102, November.
    3. repec:aer:wpaper:91 is not listed on IDEAS
    4. Sekine, Toshitaka, 1998. "Financial Liberalization, the Wealth Effect, and the Demand for Broad Money in Japan," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 16(1), pages 35-55, May.
    5. Nagayasu, Jun, 2003. "A re-examination of the Japanese money demand function and structural shifts," Journal of Policy Modeling, Elsevier, vol. 25(4), pages 359-375, June.

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