A1241
Title: Long-run money demand reconsidered
Authors: Sebastian Veldhuis - University of Klagenfurt (Austria) [presenting]
Martin Wagner - University of Klagenfurt, Bank of Slovenia and Institute for Advanced Studies, Vienna (Austria)
Abstract: Motivated by widely reported instabilities of money demand functions, a systematic analysis of potential sources and forms of such instabilities is performed. By means of a systematic econometric analysis that includes moving window analysis, formal monitoring procedures as well as nonlinearity testing of linear (cointegrating) relationships, the attempt is to obtain an improved understanding concerning instabilities, in particular, whether the sources of instabilities are comparable across countries and/or over different periods (monetary regimes). With respect to modeling nonlinear demand functions, the focus is on smooth transition cointegration analysis, with an implied focus on observable drivers of instabilities - or, more generally, of nonlinearities. The analysis is performed on a newly constructed annual frequency dataset that includes (depending upon country) real GDP, a broad and narrow monetary aggregate, consumer price and GDP deflators, a short- and long-term interest rate, the unemployment rate as well as a stock market index for about 20 countries for (depending upon country as early as) 1870 to 2023.
