The role of money supply shocks in the short-run demand for money

Previous money-demand models are either inconsistent with contemporaneous adjustment of the price level to expected changes in the nominal money supply or imply implausible interest-rate fluctuations in response to innovations in nominal money. We propose a shock-absorber money- demand model in which money supply shocks affect the synchronization of asset transactions and so engender a temporary increase or decrease in desired money holdings. Expected changes do not engender such fluctuations in real money inventories. In simultaneous estimates for eight industrial countries, the shock-absorber model proved empirically superior.     

A VARMA Analysis of the Causal Relations Among Stock Returns,Real Output,and Nominal Interest Rates

Previous research has documented a negative relation between common stock returns and inflation. Recently, Fama 3 and Geske and Roll 6 have argued that this relation results from a more fundamental one between real activity and expected inflation. Stock returns, they argue, signal changes in real activity, which in turn affect expected inflation. However, unlike Fama, Geske and Roll argue that changes in real activity result in changes in money supply growth, which in turn affect expected inflation. Empirical tests have analyzed separately each link in the proposed causal chain. In this article, we investigate simultaneously the relations among stock returns, real activity, inflation, and money supply changes using a vector autoregressive moving average (VARMA) model. Our empirical results strongly support Geske and Roll's reversed causality model.     

Are expectations of inflation rational? or Is variation of the expected real interest rate unpredictable?

The joint hypothesis developed and tested in this paper is that the nominal interest rate is a rational expectation of the real interest rate plus the inflation rate and that variation of the expected real interest rate is unpredictable on the basis of information used in the test. This test is applied to quarterly data on three-month United States Treasury bills of 1954 to 1973. The information used in the tests includes, besides past interest rates and inflation rates, past growth rates of the source base, the money supply, and real GNP. Some of the tests allow for a positive marginal tax rate, which changes the results little. The hypothesis is generally consistent with the data, which provides support for the proposition that predictable changes of the money supply do not affect expected real interest rates over periods as short as a quarter.     

Unexpected monetary disturbances during the gold standard era

This empirical paper uses the Barro methodology of estimating unexpected monetary shocks to determine the effect these shocks had on real output in the U.S. during the gold standard era between 1880 and 1913. It also investigates whether changes in a measure of financial intermediation had real effects. The results indicate that neither expected nor unexpected money shocks affected output. Changes in financial intermediation, however, were significantly correlated with output. This result lends support to theories which stress the endogeneity of broad measures of the money supply.     

On measuring the nearness of near moneys revisited

In this paper we re-examine the theoretical foundations and empirical estimation of models which incorporate a CES utility function to study the nearness of money substitutes. We show that previous studies using these models have been subject to a number of theoretical and empirical flaws. The result of these flaws has been to overestimate the degree of substitutability between money and near money assets. We show that when these errors are corrected, estimates of substitution elasticities are several times smaller than even those of the most recent studies and therefore are more in line with estimates from more traditional demand for money studies.     

Money,interest, inflation and growth in Turkey

This paper estimates a two equation model of inflation and growth in Turkey over the period 1950–1977. Inflation is determined by the difference between the rates of change in nominal money supply and real money demand. The short-run growth function consists of an expectations augmented Phillips curve, to which a credit availability effect is added. Under Turkey's disequilibrium institutional interest rate and exchange control systems, the real supply of domestic credit is determined, in large part, by real money demand which is, in turn, influenced by the real deposit rate of interest. The central bank can use both the nominal money supply and the nominal deposit rate of interest as policy instruments for stabilisation purposes.     

Demand for money in developing countries: Some theoretical and empirical results

This paper examines the role of credit restraint variables in the demand for money function for developing countries where interest rates are inoperative. A simultaneous equation model is proposed to allow for the interaction between these variables and the supply of money. Statistical results indicate that credit restraint variables in the demand for money function have stronger explanatory power than either the inflation rate or the real rate of return on money. The paper also deals with partial demand adjustment and adaptive expectations mechanisms with particular reference to the existence of credit rationing and substitution between money and real assets.     

Monetary anticipations and the demand for money: Reply to MacKinnon and Milbourne

MacKinnon and Milbourne (1984), in an extended comment on Carr and Darby (1981), claim that money supply shocks do not enter the money demand function for the United States. This reply discusses the economic and econometric errors which led to this conclusion and presents further empirical evidence in support of our approach.     

中国国际收支与货币供给关联性的实证分析:1996～2007

现阶段中国国际收支影响货币供给的传导机制为:货币需求机制和汇率安排机制。前者最终通过国际储备表现出来,而国际储备又通过"汇率安排途径"影响基础货币,最终影响货币供给量。实证分析结果表明:从静态考察,外汇储备与货币供给、外汇占款与基础货币呈高度正向关联性;从动态考察,随着外汇储备和外汇占款的增加,两者分别对货币供给和基础货币的作用效力不断增大。基于此,在汇率稳定目标下,要减轻国际收支对货币供给的不适宜冲击,应主要从平衡国际收支和推进外汇储备管理体制改革着手,并兼顾国际收支失衡对货币供给扩张和收缩两方面的影响。     

Demand and supply functions for money in Canada: Some further evidence

The demand and supply functions for money in Canada are estimated in a simultaneous-equation model format in which the supply of money is considered endogenous. The results indicate that the important determinants of the demand for money are income, short-term interest rate and lagged real cash balance variables. Wealth is an unimportant explanatory variable in money demand thus rejecting the hypothesis that an increase in outside wealth increases the demand for money. The monetary base and cash reserve ratio are important explanatory variables in the money supply function and play a direct role in monetary control.     

Output Gap Estimation and Monetary Policy in China

Using the Bayesian multivariate Beveridge-Nelson decomposition method, this paper estimates China's output gap based on a multivariate dynamic model featuring distinct interactions among real output, inflation, money, and the exchange rate in China during the period 1980-2010. The authors compare the statistical nature and potential forecasting effects of the resulting multivariate gap measure on monetary policy with those of the output gap measures based on univariate models. The empirical results show that only the measure based on the multivariate system significantly predicts monetary policy, which indicates that the output gap estimated by the multivariate system contains more information than the traditional measures for macroeconomic policy adjustments do.     

Does bank lending affect output? Evidence from the U.S. states

This paper uses a panel of state-level data to test whether changes in bank loan supply affect output. Since the U.S. states are small open economies with fixed exchange rates, state-specific shocks to money demand are automatically accommodated, leading to changes in lending if banks rely on deposits as a source of funding. Using these shocks as an instrumental variable, I find that shocks to money demand have large and statistically significant effects on the supply of bank loans, but loans have small, often negative and statistically insignificant effects on output.     

Stability of the U.S. Short-Run Money Demand Function, 1959–81

Stability tests are performed for the conventional U.S. money demand equation using switch regression techniques. This methodology provides for the identification of the shift point and the type of shift (abrupt or drift), and is conducive to hypothesis testing to determine the sources of the shift for the regression equation. Our findings do not support the contention that the 1974 change in money demand equation is a downward shift in the constant term, as suggested by many recent empirical money demand studies.     

A Note on Licensing and the Market for Real Estate Agents

This study develops and estimates a model of real estate agent demand and supply. The estimates of the model show that the licensing examination pass rate and the educational requirements set by state licensing boards affect the numbers and incomes of real estate agents. The study further shows that the demand for agents is related to economic activity in the housing market and that the supply of agents is very elastic with respect to agent earnings.     

我国货币供应量变动对保险需求传导效应的实证分析

本文通过建立STR模型,实证分析了1999年第一季度至2010年第一季度我国货币供应量变动对保险需求的传导效应。结果表明：货币供应量变动对保险需求的影响具有显著的非对称性和非线性特征,即扩张性货币政策对当期保险需求的影响显著,而紧缩性货币政策对当期保险需求的影响有限。具体来讲,宽中趋紧与紧中趋紧的货币政策都将导致当期保...     

Can money matter?

Do increases in the real money supply increase appreciably the productive capacity of the economy? Previous studies have estimated the output elasticity of real money to be between 0.02 and 1.0. Applying these estimates to the typical annual growth of real money balances suggests that fluctuations in money account for somewhere between none and all of the fluctuation in GNP. This paper develops a new estimate of the output elasticity of real balances by examining the factor share of money in national income and concludes that the output elasticity is in fact extremely small.     

Instrument instability and short-term monetary control

The literature on instrument instability tends support to a policy of smoothing interest rates: it contends that rigid adherence to a monetary rule would bring about explosive interest-rate movements. This contention is examined using a simple model which incorporates rational expectations; the results suggest that instrument instability is associated with interest-rate smoothing rather than with short-term control of the money supply. Furthermore, policy that attempts to stabilize interest rates may itself account for empirical findings which have hitherto been viewed as evidence that instrument instability would occur if the money supply were closely controlled.     

Fiscal Requirements for Dynamic and Real Determinacies in Economies with Private Provision of Liquidity: A Monetarist Assessment

We study the impact of fiscal policies on the inherent links between inflation, unemployment, and asset prices in an environment where firms provide liquidity and the central bank follows a constant money growth rate rule. Firms, other than hiring workers, also supply private assets that are not only useful as a store of value but also as collateral. When firms are not taxed and public debt is scarce, the economy is non-Ricardian so that real indeterminacies can be observed. Moreover, labor market characteristics do not affect the demand for government liabilities. However, when agents face public and private asset scarcity, labor market conditions then impact asset prices and inflation. We further show that irrespective of the type of asset scarcity agents face, when firms are taxed non-ad valorem, not only the level of tax revenues but also its composition matter for real allocations. Moreover, we show that labor market conditions directly affect the dynamics of all government liabilities and inflation.     

人民币境外存量考察:基于季度数据的协整分析和间接估计

本文根据现金需求的影响因素,构建了两个略有差异的现金需求实证模型,运用1992-2000年的季度数据,拟合出我国境内现金需求函数的表达方程,通过对比分析,选择拟合效果较好的模型来预测2001-2008年我国境内人民币需求量,通过扣除本地需求法估算出该段时期内境外人民币的存量。结果显示,2001-2008年间,人民币境外存量从100-300亿元规模开始波动上升,2006年开始呈现大幅增加的态势,达到甚至突破1000亿元;另外,人民币境外存量有较为剧烈的季节波动,这为央行制定货币政策带来一定困难。