The Representative Household’s Demand For Money In A Cointegrated VAR Model  

Oleh:

Petursson, Thorarinn G.

Jenis: Article from Journal - ilmiah internasional
Dalam koleksi: The Econometrics Journal vol. 3 no. 2 (2000), page 162-176.
Topik: Money demand; Money-in-the-utility function; Cointegration; Forward looking behaviour.
Fulltext: 162.pdf (272.03KB)

Isi artikel

A representative household model with liquidity services directly in the utility function is used to derive a stable, data congruent error correction model of broad money demand in Iceland. This model gives a linear, long-run relation between real money balances, output and the opportunity cost of holding money that is used to over-identify the cointegrating space. The over-identifying restrictions suggest that the representative household is equally averse to variations in consumption and real money holdings. Finally, a forward-looking interpretation of the short-run dynamics, assuming quadratic adjustment costs, cannot be rejected by the data.

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