Money Demand in Europe by David F. Hendry, Grayham E. Mizon (auth.), Prof. Dr. Helmut

By David F. Hendry, Grayham E. Mizon (auth.), Prof. Dr. Helmut Lütkepohl, Prof. Dr. Jürgen Wolters (eds.)

In 1999 a couple of member states of the eu Union will undertake a standard foreign money. this transformation within the financial approach calls for Eur­ opean relevant financial institution is decided up and a standard financial coverage is pursued. there's basic contract between these international locations that are prone to sign up for the typical forex that fee point balance should be the last word objec­ tive of economic po1icy. it really is an open factor, even though, what sort of coverage is most suitable for that objective. the choice innovations less than dialogue are an instantaneous inflation focusing on, an intermediate financial concentrating on or a mix of either. For those coverage innovations a reliable cash call for relation is of cen­ tral value. accordingly a workshop on funds call for in Europe used to be equipped on the Humboldt college in Berlin on October 10/11, 1997. This study convention introduced jointly educational and significant financial institution econo­ mists and econometricians predominantly from Europe to debate matters on specification, estimation and, particularly, balance of cash call for rela­ tions either in one equation and in a platforms framework. during this quantity revised types of the papers provided and mentioned on the workshop are accumulated. the quantity thereby provides an outline of cash call for research in Europe at the eve of the advent of the Euro in a few ecu international locations. It contributes to the dialogue on an appropriate financial coverage for the recent eu principal Bank.

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Mixed dating is permissible, as in [(m - p)t-l - it], and it is common in the partial adjustment literature; see Goldfeld (1973, 1976). 4Ait. Economically, mixed dating may reflect the information set relevant or available to economic agents when they are making their decisions on how much money to hold. 3 Diagnostic testing and encompassing In order to sustain inference, it is necessary for an empirical model to satisfy a range of hypotheses relating to goodness-of-fit, absence of residual autocorre1ation and heteroscedasticity, correct functiona1 form, valid exogeneity, predictive ability, parameter constancy, the statistica1 and economic interpretation of estimated coefficients, and the validity of apriori restrictions.

Hence, for Xt (a variable x at time t), LXt = Xt-I and so Llxt = Xt - Xt-I. More generally, LI>t = (1 - Ljr Xt for positive integers i andj. If i or j is not explicit, it is taken to be unity. 32 N. R. Ericsson cost ofholding money. See Hendry and Ericsson (1991b), Baba, Hendry, and Starr (1992), and Bardsen (1992) for examples. Finally, the inflation rate Ap measures the return to holding goods, so the coefficient Y4 on Ap should be negative because goods are an alternative to money. 85(Ap· 4), (4) where the coefficient on inflation is in units comparable to those on the interest rates.

Econometrica 17:1-21 Empirical modeliDg of mODey demaDd NeU R. gov) Abstract. This paper examines several central issues in the empirical modeling of money demand. These issues include economic theory, data measurement, parameter constancy, the opportunity cost of holding money, cointegration, model specification, exogeneity, and inferences for policy. Review of these issues at a general level is paralleled by discussion of specific empirical applications, including some new results on the demand for narrow money in the United Kingdom.

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