DP3249 Non-Linear Equilibrium Corection in US Real Money Balances, 1869-1997
Author(s): | David Peel, Lucio Sarno, Mark P Taylor |
Publication Date: | March 2002 |
Keyword(s): | adjustment costs, demand for money, equilibrium correction, non-linear dynamics |
JEL(s): | E41 |
Programme Areas: | International Macroeconomics |
Link to this Page: | cepr.org/active/publications/discussion_papers/dp.php?dpno=3249 |
Several theoretical models of money demand imply non-linear functional forms for the aggregate demand for money characterized by smooth adjustment towards long-run equilibrium. In this Paper, we propose a non-linear equilibrium correction model of US money demand, which is shown to be stable over the sample period from 1869 to 1997.