Monetary anticipations and the demand for money: further tests of shock-absorber price equations

Article Abstract:

The Carr-Darby-Thornton (CDT) approach has been strongly debated for its treatment of conventional demand-for-money functions supplemented with unexpected money supply shocks as a price equation. Data from New Zealand are used to test the set of joint restrictions implied by the CDT approach. In the test, no assumptions are made about the covariance between disturbance terms in money forecasting and "price" equations. Instead, the effect of the assumption of income and interest rate exogeneity on test results are examined. Results indicate that all restrictions in the CDT approach should be rejected.

Research, Money supply

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A substitution test of long-run money demand

Article Abstract:

A long-run money demand model with a cash-credit cash-in-advance framework is extended to account for monetary economies with greater inside and outside money options. The model also establishes long-run substitution in a payments system structure featuring interest bearing and non-interest bearing media of exchange. The model generated an alternative specification that features a restricted long-run money demand function.

Demand functions (Economics), Demand functions

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On asymmetric costs of disequilibrium and forecasting money demand

Article Abstract:

A model defined by stock adjustment and money demand is extended to account for asymmetric costs in cases of binding money demand and surplus money balances. An optimal partition is considered to be the lowest total sum of squared residuals. The model produced superior static and dynamic money demand forecasts for 1974-78 and 1974-90 when compared with single equation models.

Economic forecasting

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