Skip to main content

Structural changes and the US money demand function

Buy Article:

$55.00 plus tax (Refund Policy)

Abstract:

Previous literature on the stability of the US money demand function suggests mixed results. In this article, we study the stability of the money demand function from the standpoint of structural changes in the function. We first investigate if a stable money demand function can be found for the US for the period from the first quarter of 1959 to the fourth quarter of 2000. The results show that a stable long-run money demand function does not exist for the sample period under consideration. We then estimate unknown structural break points in the variables of the money demand function using Bai and Perron's (1998) method and test if there is a stable relationship in each sub-sample period of the break points. The results show that a stable relationship exists for each sub-sample period. The estimated income elasticity and interest rate semi-elasticity are relatively smaller than Ball's (2001) estimates, but consistent with his argument.

Document Type: Research Article

DOI: https://doi.org/10.1080/00036840601007385

Affiliations: 1: Department of Economics, University of Seoul, 90 Cheonnong-dong, Seoul, 130-743, South Korea 2: Department of Economics, Ohio University, Athens, OH 45701, USA

Publication date: 2009-04-01

More about this publication?
  • Access Key
  • Free content
  • Partial Free content
  • New content
  • Open access content
  • Partial Open access content
  • Subscribed content
  • Partial Subscribed content
  • Free trial content
Cookie Policy
X
Cookie Policy
Ingenta Connect website makes use of cookies so as to keep track of data that you have filled in. I am Happy with this Find out more