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A systemic approach to modelling and estimating demand for money(ies)

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  • Mauricio Calani
  • J. Rodrigo Fuentes
  • Klaus Schmidt-Hebbel

Abstract

This article uses a consumer theory-based systemic approach to model the demand for monetary liquid asset holdings in Chile. We implement the suggestions and caveats of aggregation theory for the estimation of a demand system for liquid assets (monies) in static, dynamic and time-varying parameters setups. Our results are robust and theoretically consistent with consumer theory restrictions, as a system derived from a utility maximizing framework and a quasi concave utility function. In our estimations, we find stability of interest rate elasticities, in contrast to previous related literature. We also document evidence that long (short) maturity rates are associated to less (more) liquid assets.

Suggested Citation

  • Mauricio Calani & J. Rodrigo Fuentes & Klaus Schmidt-Hebbel, 2013. "A systemic approach to modelling and estimating demand for money(ies)," Applied Economics, Taylor & Francis Journals, vol. 45(16), pages 2141-2162, June.
    • Handle: RePEc:taf:applec:45:y:2013:i:16:p:2141-2162
    DOI: 10.1080/00036846.2011.610745
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    References listed on IDEAS

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    1. Ng, Serena, 1995. "Testing for Homogeneity in Demand Systems When the Regressors Are Nonstationary," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 10(2), pages 147-163, April-Jun.
    2. Apostolos Serletis, 2007. "The Demand for Money," Springer Books, Springer, edition 0, number 978-0-387-71727-2, March.
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