IDEAS home Printed from https://ideas.repec.org/p/phs/dpaper/198211.html
   My bibliography  Save this paper

Truncation Bias in Household Money Demand Tests

Author

Listed:
  • Manuel F. Montes

Abstract

This paper estimates a demand for money function on household panel data from a national sample in the United States and constructed cross section interest rates. Its principal focus is the problem of truncation bias from a set of observations, which include zero observations of the dependent variable. This problem is treated as one of misspecification, the missing variable being the inverse of the Mills ratio. The auxiliary function which measures the probability of observing a positive value for the dependent variables, is used to estimate the inverse of the Mills ratio. This ratio is a significant explanatory variable in the demand for money equation - indicating the existence of truncation bias when only positive observations are used in the estimation procedure. There is an increase in the income elasticity with this added variable an indication of household economizing on money balances. Other results of the estimation exercise point to the importance of human capital and value of household time consideration in the household demand for money.

Suggested Citation

  • Manuel F. Montes, 1982. "Truncation Bias in Household Money Demand Tests," UP School of Economics Discussion Papers 198211, University of the Philippines School of Economics.
    • Handle: RePEc:phs:dpaper:198211
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:phs:dpaper:198211. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: RT Campos (email available below). General contact details of provider: https://edirc.repec.org/data/seupdph.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.