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Evaluating conflicting stability results in german money demand regressions

Title data

Herz, Bernhard ; Röger, Werner:
Evaluating conflicting stability results in german money demand regressions.
In: Weltwirtschaftliches Archiv. Vol. 126 (1990) Issue 4 . - pp. 691-708.
ISSN 0043-2636
DOI: https://doi.org/10.1007/BF02707475

Abstract in another language

In this paper we have tried to find the central assumptions necessary to obtain stable money demand functions for the Federal Republic of Germany. We found the hypothesis about the seasonal process to be such a crucial assumption.
Once changes in the seasonal pattern are accounted for, the conventional Goldfeld specification yields relatively good results concerning stability. More complex formulations of money demand using complicated lag structures, the theoretically dubious rate of inflation and foreign interest rates are not necessary to achieve stability. The instability of money demand as a consequence of a break in the seasonality of the income process is attributed to measurement errors, as quarterly income reflecting changes in seasonal production patterns does not properly take into account the seasonal structure of the volume of transactions. This conjecture also helps to explain the differing regression results based on alternative data transformations. Taken together, the evidence suggests to accept the old-fashioned Goldfeld specification in levels as not such a bad description of the long-run characteristics of Germany’s money demand. Inferences on the speed of adjustment derived from this equation should, however, not be trusted.

Abstract in another language

Eine Untersuchung widersprüchlicher Stabilitätsbefunde in den Regressionen der Geldnachfrage für die Bundesrepublik Deutschland. — Die bisherigen Analysen der Stabilität der Geldnachfrage in der Bundesrepublik haben zu widersprüchlichen Ergebnissen geführt. Ein Vergleich der verschiedenen in diesen Analysen verwendeten Spezifikationen deutet auf stabile funktionale Beziehungen in den Geldnachfragefunktionen hin. Im Gegensatz dazu haben sich jedoch Brüche im saisonalen Muster des Einkommens als wesentliche Ursache für Instabilitäten erwiesen. Dieses Ergebnis steht im Einklang mit einer Fehler-in-den-Variablen-Interpretation der Schätzgleichungen. Die Konsequenzen dieser Hypothese für die Schätzung von Gleichungen in Niveaus und ersten Differenzen werden in diesem Artikel abgeleitet. Sie stimmen mit den Regressionsergebnissen für die verwendeten Daten überein.

Further data

Item Type: Article in a journal
Refereed: Yes
Institutions of the University: Faculties > Faculty of Law, Business and Economics > Department of Economics > Chair Economics I > Chair Economics I - Univ.-Prof. Dr. Bernhard Herz
Faculties
Faculties > Faculty of Law, Business and Economics
Faculties > Faculty of Law, Business and Economics > Department of Economics
Faculties > Faculty of Law, Business and Economics > Department of Economics > Chair Economics I
Result of work at the UBT: No
DDC Subjects: 300 Social sciences > 330 Economics
Date Deposited: 20 May 2015 06:58
Last Modified: 20 May 2015 06:58
URI: https://eref.uni-bayreuth.de/id/eprint/10173