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MODELING MONETARY TRENDS IN ITALY USING HISTORICAL DATA: THE DEMAND FOR BROAD MONEY 1861—1990
Author(s) -
Muscatelli Vito Antonio,
Spinelli Franco
Publication year - 1996
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.1465-7295.1996.tb01398.x
Subject(s) - economics , cointegration , econometrics , inflation (cosmology) , demand for money , broad money , sample (material) , contrast (vision) , estimation , interest rate , macroeconomics , computer science , chemistry , physics , management , chromatography , artificial intelligence , theoretical physics
In this paper we estimate a stable demand for money relationship for Italy using a long series of historical data. We extend previously available data sets to obtain a sample for the years 1861 to 1990 and use cointegration analysis and two‐stage estimation procedures to obtain a dynamic model for M2 demand. By employing a small number of explanatory variables and a nonlinear error‐correction model we find a stable demand for money relationship. Our model incorporates significant inflation and interest rate effects, in contrast to previous studies of this type.