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The Demand for M1 in the United States: A Commenton Baba, Hendry, and Starr
Author:
Mr. James M. Boughton
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Series:
IMF Working Papers
Volume/Issue:
Volume 1993: Issue 024
Language:
English
Publication Date:
01 Mar 1993
DOI:
https://doi.org/10.5089/9781451920963.001
ISBN:
9781451920963
ISSN:
1018-5941
Pages:
10
Keywords:
WP; standard error; Bhs equation; Bhs interest-rate effect; Bhs model; steady-state elasticity; interest elasticity; Demand for money; Short term interest rates
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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A recent paper by Baba, Hendry, and Starr presents an error-correction model of the demand for M1 in the United States, which shows a dramatic improvement in both fit and stability over earlier models. This note estimates an alternative model with the same data set and draws two conclusions: that the improvements are due more to the use of complex dynamics than to the introduction of variables representing financial innovation, and that some of the economic properties are not robust with respect to minor changes in specification.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund