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A Note on Modelling Money Demand in Growing Economies
Author(s) -
Basu Parantap,
Salyer Kevin D.
Publication year - 2001
Publication title -
bulletin of economic research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.227
H-Index - 29
eISSN - 1467-8586
pISSN - 0307-3378
DOI - 10.1111/1467-8586.00117
Subject(s) - cointegration , economics , econometrics , demand for money , demand curve , function (biology) , macroeconomics , monetary economics , monetary policy , keynesian economics , microeconomics , evolutionary biology , biology
A prominent feature of US data is the lack of cointegration between nominal interest rates and M1 velocity. Yet, most general‐equilibrium monetary models that have been used for empirical analysis have imposed cointegration between these two series. This paper presents as an alternative a money‐in‐the‐utility function model which does not imply cointegration even though a well‐defined stationary monetary equilibrium exists.