The dynamic Laurent flexible form and the demand for money

✍ Scribed by Adrian R. Fleissig

• Publisher: John Wiley and Sons
• Year: 1997
• Tongue: English
• Weight: 179 KB
• Volume: 12
• Category: Article
• ISSN: 0883-7252
• DOI: 10.1002/(sici)1099-1255(199711/12)12:6<687::aid-jae435>3.0.co;2-s

✦ Synopsis

I derive the dynamic full Laurent model to estimate economic models that assume a dynamic process. The application in this paper is to use the dynamic full Laurent to estimate a system of dynamic asset demand equations. The main results are that the dynamic full Laurent rejects its static version and the estimated elasticities are variable over time. Results from a Monte Carlo analysis, using a dynamic data-generating process, show that the prediction errors from the dynamic full Laurent are much smaller than those from the static version. Thus when the data are generated by a dynamic process, inferences from the static full Laurent model can be severely biased.