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Breaks in the UK Household Sector Money Demand Function
Author(s) -
Bissoondeeal Rakesh,
Karoglou Michail,
Mullineux Andy
Publication year - 2014
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/manc.12043
Subject(s) - economics , cointegration , demand for money , inflation (cosmology) , econometrics , demand curve , sample (material) , function (biology) , estimation , monetary economics , monetary policy , microeconomics , chemistry , physics , management , chromatography , theoretical physics , evolutionary biology , biology
We use non‐parametric procedures to identify breaks in the underlying series of UK household sector money demand functions. Money demand functions are estimated using cointegration techniques and by employing both the S imple S um and D ivisia measures of money. P ‐star models are also estimated for out‐of‐sample inflation forecasting. Our findings suggest that the presence of breaks affects both the estimation of cointegrated money demand functions and the inflation forecasts. P ‐star forecast models based on D ivisia measures appear more accurate at longer horizons and the majority of models with fundamentals perform better than a random walk model.