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International Evidence on the Demand for Money

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Abstract

One of the current questions in the literature on the demand for money is whether the adjustment of actual to desired money holdings is in nominal or real terms. This paper describes a simple procedure that can be used to test the nominal against the real hypothesis. The test is carried out for 27 countries. The paper also tests the structural stability of the demand for money equations and the correctness of the dynamic specification.

Suggested Citation

  • Ray C. Fair, 1986. "International Evidence on the Demand for Money," Cowles Foundation Discussion Papers 813, Cowles Foundation for Research in Economics, Yale University.
    • Handle: RePEc:cwl:cwldpp:813
    Note: CFP 732.
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    1. Rik Hafer & Scott E. Hein, 1980. "The dynamics and estimation of short-run money demand," Review, Federal Reserve Bank of St. Louis, vol. 62(Mar), pages 26-35.
    2. Fair, Ray C, 1970. "The Estimation of Simultaneous Equation Models with Lagged Endogenous Variables and First Order Serially Correlated Errors," Econometrica, Econometric Society, vol. 38(3), pages 507-516, May.
    3. Spencer, David E, 1985. "Money Demand and the Price Level," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 490-496, August.
    4. Donald W.K. Andrews & Ray C. Fair, 1987. "Inference in Econometric Models with Structural Change," Cowles Foundation Discussion Papers 832, Cowles Foundation for Research in Economics, Yale University.
    5. Stephen M. Goldfeld, 1976. "The Case of the Missing Money," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 7(3), pages 683-740.
    6. Hendry, David F. & Pagan, Adrian R. & Sargan, J.Denis, 1984. "Dynamic specification," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 18, pages 1023-1100, Elsevier.
    7. Judd, John P & Scadding, John L, 1982. "The Search for a Stable Money Demand Function: A Survey of the Post-1973 Literature," Journal of Economic Literature, American Economic Association, vol. 20(3), pages 993-1023, September.
    8. Milbourne, Ross, 1983. "Price Expectations and the Demand for Money: Resolution of a Paradox," The Review of Economics and Statistics, MIT Press, vol. 65(4), pages 633-638, November.
    9. Daniel L. Thornton, 1985. "Money demand dynamics: some new evidence," Review, Federal Reserve Bank of St. Louis, vol. 67(Mar), pages 14-23.
    10. Gregory C. Chow, 1966. "On the Long-Run and Short-Run Demand for Money," Journal of Political Economy, University of Chicago Press, vol. 74(2), pages 111-111.
    11. Rik Hafer, 1985. "Monetary stabilization policy: evidence from money demand forecasts," Review, Federal Reserve Bank of St. Louis, vol. 67(May), pages 21-26.
    12. Hwang, Hae-shin, 1985. "Test of the Adjustment Process and Linear Homogeneity in a Stock Adjustment Model of Money Demand," The Review of Economics and Statistics, MIT Press, vol. 67(4), pages 689-692, November.
    13. Stephen M. Goldfeld, 1973. "The Demand for Money Revisited," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 4(3), pages 577-646.
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    Keywords

    Money demand;

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