Hostname: page-component-7479d7b7d-c9gpj Total loading time: 0 Render date: 2024-07-10T21:33:12.466Z Has data issue: false hasContentIssue false
  • English
  • Français

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
Get access Rights & Permissions [Opens in a new window]

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

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Anderson Richard G. & Jerry G. Thursby 1986 Confidence intervals for elasticity estimators in translog models. Review of Economics and Statistics 68, 647– 656.Google Scholar
Anderson Richard G., Barry E. Jones & Travis D. Nesmith 1997 Building new monetary services indexes: Concepts, data, and methods. Federal Reserve Bank of St. Louis Review 79, 53– 82.Google Scholar
Barnett William A. 1983 New indices of money supply and the flexible Laurent demand system. Journal of Business and Economic Statistics 1, 7– 23.Google Scholar
Barnett William A. 1985 The minflex Laurent translog functional form. Journal of Econometrics 30, 33– 44.Google Scholar
Barnett William A. 2002 Tastes and technology: Curvature is not sufficient for regularity. Journal of Econometrics 108, 199– 202.Google Scholar
Barnett William A. & A. Jonas 1983 The Muntz-Szatz demand system: an application of a globally well-behaved series expansion. Economics Letters 11, 337– 342.Google Scholar
Barnett William A. & Y.W. Lee 1985 The global properties of the minflex Laurent, generalized Leontief, and translog flexible functional forms. Econometrica 53, 1421– 1437.Google Scholar
Barnett William A. & Meenakshi Pasupathy 2003 Regularity of the generalized quadratic production model: a Counterexample. Econometric Reviews 22, 135– 154.Google Scholar
Barnett William A. & Apostolos Serletis 2000 The Theory of Monetary Aggregation. Contributions to Economic Analysis 245. Amsterdam: North-Holland.
Barnett William A., Y.W. Lee & M.D. Wolfe 1985 The three-dimensional global properties of the minflex Laurent, generalized Leontief, and translog flexible functional forms. Journal of Econometrics 30, 3– 31.Google Scholar
Barnett William A., Y.W. Lee & M.D. Wolfe 1987 The global properties of the two minflex Laurent flexible functional forms. Journal of Econometrics 36, 281– 298.Google Scholar
Barnett William A. & P. Yue 1988 Semi-nonparametric estimation of the asymptotically ideal model: the AIM demand system. In G. Rhodes and T.B. Fomby (eds.), Advances in Econometrics, vol VII, Greenwich, CT: JAI Press.
Barnett William A., J. Geweke & M. Wolfe 1991 Semi-nonparametric Bayesian estimation of the asymptotically ideal production model. Journal of Econometrics 49, 5– 50.Google Scholar
Barnett William A., Douglas Fisher & Apostolos Serletis 1992 Consumer theory and the demand for money. Journal of Economic Literature 30, 2086– 2119.Google Scholar
Burguete Jose F., A. Ronald Gallant & Geraldo Souza 1982 On unification of the asymptotic theory of nonlinear econometric models. Econometric Reviews 1, 151– 190.Google Scholar
Chetty V. Karuppan 1969 On measuring the nearness of near-moneys. American Economic Review 59, 270– 281.Google Scholar
Diewert W. Erwin, M. Avriel & I. Zang 1977 Nine kinds of quasiconcavity and concavity. Journal of Economic Theory 25, 397– 420.Google Scholar
Drake Leigh M., Adrian R. Fleissig & James L. Swofford 2003 A semi-nonparametric approach to the demand for U.K. monetary assets. Economica 70, 99– 120.Google Scholar
Eastwood Brian J. & A. Ronald Gallant 1991 Adaptive rules for semi-nonparametric estimators that achieve asymptotic normality. Econometric Theory 7, 307– 340.Google Scholar
Fisher I. 1922 The Making of Index Numbers: A Study of Their Varieties, Tests, and Reliability. Boston: Houghton Mifflin.
Fisher Douglas & Adrian R. Fleissig 1997 Monetary aggregation and the demand for assets. Journal of Money, Credit and Banking 29, 458– 475.Google Scholar
Fleissig Adrian R. & Apostolos Serletis 2002 Semi-nonparametric estimates of substitution for Canadian monetary assets. Canadian Journal of Economics 35, 78– 91.Google Scholar
Fleissig Adrian R. & James L. Swofford 1996 A dynamic asymptotically ideal model of money demand. Journal of Monetary Economics 37, 371– 380.Google Scholar
Fleissig Adrian R. & James L. Swofford 1997 Dynamic asymptotically ideal models and finite approximation. Journal of Business and Economic Statistics 15, 482– 492.Google Scholar
Fisher Douglas, Adrian R. Fleissig & Apostolos Serletis 2001 An empirical comparison of flexible demand system functional forms. Journal of Applied Econometrics 16, 59– 80.Google Scholar
Gallant A. Ronald 1981 On the bias in flexible functcional forms and an essentially unbiased form: The Fourier flexible form. Journal of Econometrics 15, 211– 245.Google Scholar
Gallant A. Ronald 1982 Unbiased determination of production technologies. Journal of Econometrics 20, 285– 323.Google Scholar
Gallant A. Ronald & Gene H. Golub 1984 Imposing curvature restrictions on flexible functional forms. Journal of Econometrics 26, 295– 321.Google Scholar
Huber Peter J. 1981 Robust Statistics. New York: Wiley.
Lau L.J. 1978 Testing and imposing monotonicity, convexity, and quasi-convexity constraints. In M. Fuss and D. McFadden (eds.), Production Economics: A Dual Approach to Theory and Applications, vol. 1, Amsterdam: North-Holland (1978), pp. 409– 453.
Offenbacher E.K. 1979 The Substitution of Monetary Assets. Ph.D. Dissertation, University of Chicago.
Serletis Apostolos 2001 The Demand for Money: Theoretical and Empirical Approaches. Amsterdam: Kluwer Academic.
Uzawa H. 1962 Production functions with constant elasticities of substitution. Review of Economic Studies 29, 291– 299.Google Scholar
Varian Hal R. 1982 The nonparametric approach to demand analysis. Econometrica 50, 945– 973.Google Scholar
Varian Hal R. 1983 Nonparametric tests of consumer behaviour. Review of Economic Studies 50, 99– 110.Google Scholar
Zellner A. 1962 An efficient method of estimating seemingly unrelated regressions and tests for aggregation bias. Journal of the American Statistical Association 57, 348– 368.Google Scholar