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Cointegration and Structural Change: An Application to the U.S. Demand for Money

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  • Wankeun Oh

Abstract

I perform the cointegration tests for the trivariate model of real monetary aggregates, real personal income, and short-term interest rate. I find the existence of a long-run relationship among these three variables. To check the stability of a long-run money demand relationship, I implement a rank constancy test and CUSUM test. The test results show that real M1 is relatively more stable than other aggregates, but structural change occurred during the 1970s and early 1980s. This is consistent with prior research on money demand. Copyright 2002, Oxford University Press.

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  • Wankeun Oh, 2002. "Cointegration and Structural Change: An Application to the U.S. Demand for Money," Economic Inquiry, Western Economic Association International, vol. 40(1), pages 91-101, January.
    • Handle: RePEc:oup:ecinqu:v:40:y:2002:i:1:p:91-101
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