Modelling money demand in Germany

✍ Scribed by Andreas Beyer

• Publisher: John Wiley and Sons
• Year: 1998
• Tongue: English
• Weight: 250 KB
• Volume: 13
• Category: Article
• ISSN: 0883-7252
• DOI: 10.1002/(sici)1099-1255(199801/02)13:1<57::aid-jae457>3.0.co;2-z

✦ Synopsis

In this paper an empirically stable money demand model for M3 in Germany is presented. The sample period 1975±94 includes German uni®cation. It is shown that this development has not substantially destabilized money demand. Parameter stability is extensively tested and not rejected. Applying encompassing tests, this model encompasses two recent models but is not encompassed by them. Exogeneity of the explanatory variables is discussed and tested along the de®nitions given in Engle, Hendry and Richard (1983). There is evidence that in¯ation and long-term interest rates are super-exogenous with respect to the parameters of the demand for M3 model. This result and the empirical long-run money demand function presented in this paper may aect the applicability of the so called `P-Star concept' for German M3.