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SEMI-NONPARAMETRIC ESTIMATES OF THE DEMAND FOR MONEY IN THE UNITED STATES

Published online by Cambridge University Press:  25 October 2005

APOSTOLOS SERLETIS  and
ASGHAR SHAHMORADI
APOSTOLOS SERLETIS
Affiliation:
University of Calgary
ASGHAR SHAHMORADI
Affiliation:
University of Calgary
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Abstract

This paper focuses on the demand for money in the United States in the context of two globally flexible functional forms—the Fourier and the asymptotically ideal model (AIM)—estimated subject to full regularity, using methods suggested over 20 years ago. We provide a comparison in terms of violations of the regularity conditions for consumer maximization and in terms of output in the form of a full set of elasticities. We also provide a policy perspective, using (for the first time) parameter estimates that are consistent with global regularity, in that a very strong case can be made for abandoning the simple-sum approach to monetary aggregation, on the basis of the low elasticities of substitution among the components of the popular M2 aggregate of money.

Keywords

Flexible Functional FormsFourierAsymptotically Ideal Model

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Type
ARTICLES
Information
Macroeconomic Dynamics , Volume 9 , Issue 4 , September 2005 , pp. 542 - 559
Copyright
© 2005 Cambridge University Press

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