The Demand for Money: A Dynamic Rational Expectations Model.
This paper presents and estimates a model of the demand for money which explicitly incorporates foward-looking behavior. A multiperiod, rational expectations, quadratic costs of adjustment problem is solved using the discrete time calculus of variations to yield a money demand equation which is both foward-looking and contains a lagged dependent variable, and nests partial adjustment and error correction alternatives. The equation is estimated jointlywith a vector autoregression for the forcing variables, subject to cross-equation restrictions in an attempt to circumvent the R. E. Lucas_(1976) critique, on U. K. data for narrow money, MI. The results are encouraging. Copyright 1987 by Royal Economic Society.
Year of publication: |
1987
|
---|---|
Authors: | Cuthbertson, Keith ; Taylor, Mark P |
Published in: |
Economic Journal. - Royal Economic Society - RES, ISSN 1468-0297. - Vol. 97.1987, 388a, p. 65-76
|
Publisher: |
Royal Economic Society - RES |
Saved in:
Saved in favorites
Similar items by person
-
Cuthbertson, Keith, (1992)
-
Anticipated and Unanticipated Variables in the Demand for M1 in the U.K.
Cuthbertson, Keith, (1989)
-
Cuthbertson, Keith, (1986)
- More ...