Rational expectations and the demand for money: a nonparametric approach

Article Abstract:

Simple-sum and Divisa aggregates are used to test the effect of rational expectations of income and interest rate on the US demand for money. The monetary measures used are subjected to identification and information orthogonality tests, while alternative specifications are identified via the Akaike Criterion. The results suggest non-rationality, with the simple-sum data leading to a less rational outcome than that of the Divisa aggregates. The study lends support to the rational expectations hypothesis, as well as has important implications for the preparation of reliable monetary aggregates.

Usage, Measurement, Monetary policy, Rational expectations (Economics), Nonparametric statistics

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Money demand during hyperinflation: cointegration, rational expectations, and the importance of money demand shocks

Article Abstract:

The Cagan model is used to study factors affecting hyperinflation episodes in China, Hungary and Yugoslavia-Serbia, with particular attention placed on money demand and price level dynamics. The Chinese and Hungarian hyperinflation episodes were shown to be responsive to the Cagan model especially when such restrictions as rational expectations are imposed and test of cointegration are applied. The model showed that demand shocks play an important role in explaining money demand in episodes of hyperinflation.

Economics, Research and Development in the Social Sciences and Humanities, Models, Economic policy

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Inflation and money growth under the International Gold Standard, 1850-1913

Article Abstract:

The impact of the International Gold Standard on the money supply and inflation rate in 12 European countries is investigated via correlation and cointegration techniques. Both tests reveal a trend toward lower price levels and higher integration of inflation. These are not supported by data and it is surmised that the discrepancy may be due to the countries' machinations to 'circumvent the system' and to fluctuations in the money demand among the 12 countries.

Influence, Money supply, Gold standard

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