Open AccessPolicy Uncertainty and the Demand for Money in Japan
Author(s) -
Mohsen BahmaniOskooee,
Majid Maki Nayeri
Publication year - 2020
Publication title -
review of economic analysis
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.101
H-Index - 1
ISSN - 1973-3909
DOI - 10.15353/rea.v12i1.1692
Subject(s) - economics , volatility (finance) , monetary policy , measure (data warehouse) , money supply , cash , stabilization policy , econometrics , monetary economics , demand shock , macroeconomics , database , computer science
In an attempt to establish stability of the demand for money, some recent studies have included the volatility of the money supply and output to account for uncertainty. In this paper we consider the experience of Japan but rather than including an uncertainty measure related to money supply and output, we include a relatively more comprehensive measure known as Economic Policy Uncertainty. When we included this later measure, we were unable to find a stable money demand in Japan. However, when we introduced the nonlinear adjustment of policy uncertainty, we not only found a stable money demand but also meaningful estimates. Since the approach allows us to assess asymmetries, we found that in Japan the public hold more cash when there is an increase or a decrease in uncertainty.