The purpose of this paper is to apply pair-wise and multiple-alternative nonnested tests to the choice of the scale variable in the money demand functions of Japan and Germany. Findings based on the multiple-alternative procedure indicate that domestic absorption (income minus net exports) is...

The choice of the scale variable in the money demand function is important because of its striking implications on the magnitude and direction of the domestic monetary and fiscal policy effects and effectiveness of international policy coordination. In this study several tests are applied to the...

The purpose of this paper are twofold: first, to apply a Box-Cox model to the UK money demand relationship within an open economy framework in order to empirically investigate the proper functional form supported by the data in this general setting. Secondly, to test for the proper scale...