Currency substitution and nonlinear error correction in Taiwan's demand for broad money
We modify the conventional money demand function by including a real exchange rate variable to reflect the effect of currency substitution. Empirical evidence indicates that the variable is crucial to the long-run stability of Taiwan's money demand. After finding the failure of a linear error-correction model (ECM) in describing the dynamics of Taiwan's money demand, we apply a nonlinear ECM to examine its dynamics and support the appropriateness of the nonlinear model empirically.
No Reference information available - sign in for access.
No Citation information available - sign in for access.
No Supplementary Data.
No Article Media
Document Type: Research Article
Institute of Economics, National Sun Yat-Sen University, Kaohsiung, Taiwan,Department of Economics, National Chung-Cheng University, Chia-Yi, Taiwan
Department of Economics, National Chung-Cheng University, Chia-Yi, Taiwan,Department of International Trade, Cheng-Shiu Technological University, Kaohsiung, Taiwan
Publication date: 01 July 2007
More about this publication?