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Estimating a Cagan-type demand function for gold: 1561-1913

Author

Listed:
  • Alexei Deviatov

    (New Economic School)

  • Neil Wallace

    (Pennsylvania State University)

Abstract

Long times series on production of gold and the value of gold, taken from Jastram’s book The Golden Constant, are used to estimate a Cagan-type demand function that relates the real total value of gold to its expected rate of return. The model assumes that gold production and a latent scale variable (income or consumption) are jointly exogenous and that the data are measured with error. The data reject the model: the estimates imply that the real value of gold varies a great deal relative to the expected return and depends negatively, rather than positively, on the expected return.

Suggested Citation

  • Alexei Deviatov & Neil Wallace, 2006. "Estimating a Cagan-type demand function for gold: 1561-1913," Working Papers w0080, Center for Economic and Financial Research (CEFIR).
    • Handle: RePEc:cfr:cefirw:w0080
    as

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    References listed on IDEAS

    as
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    8. Salemi, Michael K & Sargent, Thomas J, 1979. "The Demand for Money during Hyperinflation under Rational Expectations: II," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 20(3), pages 741-758, October.
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    More about this item

    Keywords

    gold; Cagan demand function; estimation;
    All these keywords.

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money

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