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The Dynamic Laurent Flexible Form and the Demand for Money

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  • Fleissig, Adrian R

Abstract

I derive the dynamic full Laurent model to estimate economic models that assume a dynamic process. The application in this paper is to use the dynamic full Laurent to estimate a system of dynamic asset demand equations. The main results are that the dynamic full Laurent rejects its static version and the estimated elasticities are variable over time. Results from a Monte Carlo analysis, using a dynamic data-generating process, show that the prediction errors from the dynamic full Laurent are much smaller than those from the static version. Thus when the data are generated by a dynamic process, inferences from the static full Laurent model can be severely biased.

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  • Fleissig, Adrian R, 1997. "The Dynamic Laurent Flexible Form and the Demand for Money," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 12(6), pages 687-699, Nov.-Dec..
    • Handle: RePEc:jae:japmet:v:12:y:1997:i:6:p:687-99
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    File URL: http://qed.econ.queensu.ca:80/jae/1997-v12.6/
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    Cited by:

    1. Albert A. Okunade, 2003. "Are Factor Substitutions in HMO Industry Operations Cost Saving?," Southern Economic Journal, John Wiley & Sons, vol. 69(4), pages 800-821, April.

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