Evidence on nonlinear error correction in money demand: the case of Taiwan
Authors: Huang, Cliff J.; Lin, Chien-Fu Jeff; Cheng, Jen-Chi
Source: Applied Economics, Volume 33, Number 13, 20 October 2001 , pp. 1727-1736(10)
Abstract:This paper proposes a nonlinear error-correction model based upon smooth transition regression methodology. The model is specified such that the short-run adjustment toward long-run equilibrium is nonlinear and that the error correction is a smooth function of long-run deviation. Empirical results obtained from estimating M2 money demand in Taiwan support the hypothesis of a nonlinear error-correction process and provide better interpretation of change in the demand for money.
Document Type: Research Article
Publication date: October 20, 2001