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NOMINAL COSTS AND THE DEMAND FOR REAL TRANSACTIONS BALANCES
Author(s) -
SWOFFORD JAMES L.,
WHITNEY GERALD A.
Publication year - 1985
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1985.tb01792.x
Subject(s) - economics , sample (material) , gdp deflator , constant (computer programming) , econometrics , microeconomics , computer science , real gross domestic product , programming language , chemistry , chromatography
The standard specification of constant real transactions costs assumes that over the sample period transactions costs move in lock‐step with the GNP deflator; our model assumes that transactions costs move negligibly compared to the GNP deflator. That is, nominal transactions costs are assumed constant here rather than real transactions costs as in other estimates of money demand. We find with this nominal‐transactions‐cost specification that the real money demand function is more stable in terms of the stability of the coefficients and the accuracy of out of sample predictions than indicated by earlier studies.