The stability of the demand for money and M1 velocity: Evidence from the sectoral data

Testing linearity in a cointegrating STR model for the money demand function: International evidence from G-7 countries

“…However, Butkiewicz and McConnell [5] find parameter instability in U.S. money demand, because of financial deregulation. Overall, assuming a linear process for the error term in the conventional linear MDF implies that the adjustment process is continuous with a constant speed of adjustment.…”

“…For the money balance, real narrow money (M1) (currency plus demand deposits held by households and enterprises) and real broad money (M2) (M1 plus quasi-money) are selected due to convenience of observation as well as by comparing with the empirical results. 5 For income (Y), we use GDP as a proxy variable. However, M1, M2, and Y are deflated by the consumer price index (2000 = 100) and transferred into real variables RM1, RM2, and RY, respectively.…”

Household money demand: The euro area case

“…These range from simple formulations such as including only the long-term nominal treasury yield (Jain and Moon (1994)) or the shortterm commercial paper rate (Laumas, 1979). Semi-log and double-log specifications are used (Butkiewicz and McConnell, 1995). More complex approaches include the spread between the 3 month t-bill rate and the own rate of money (Thomas, 1997;Petursson, 2000) or between the yield on public bonds and the own rate (Read, 1996).…”

“…Goldfeld finds that money holdings by households are quite well explained by these variables and have reasonable parameter estimates. Since the publication of Goldfeld (1973), a number of studies have attempted to explain household money demand using cointegration methods -either based on single equations (Butkiewicz and McConnell, 1995) or based on systems of equations (e.g. Jain and Moon, 1994;Thomas, 1997;Chrystal and Mizen, 2001).…”

“…The main scale variable of money demand considered includes real consumer expenditure (Jain and Moon, 1994;Read, 1996), real (permanent) disposable income (Butkiewicz and McConnell, 1995;Laumas, 1979), real net labour income (Chrystal and Mizen, 2001) and real GDP (Petursson, 2000;Feiss and MacDonald, 2001). In addition, both real gross personal sector wealth (Thomas, 1997;Read, 1996) and real net total wealth (Chrystal and Mizen, 2001) are intended to capture an additional element of scale.…”