Working Papers, Department of Economics, Lund University
The Demand for Monetary Assets in the UK; a Locally Flexible Demand System Analysis
Abstract: This study provides strong empirical support for modeling
the demand for monetary assets within a consumer demand framework. We
estimate a linearised locally flexible almost ideal demand system,
containing five monetary assets, over the period 1991Q4 to 1998Q4.
Estimating the system in differences is a convenient method to account for
possible non-stationarity in the data, a major concern for applied
macroeconomists. All significant un-compensated own-price elasticities are
negative. The compensated own-price elasticities are insignificant and the
majority of the income elasticities are significant. Theoretical
homogeneity and symmetry propositions are satisfied.
Keywords: Money Demand; Almost Ideal Demand System; (follow links to similar papers)
JEL-Codes: C43; D12; E41; (follow links to similar papers)
34 pages, February 28, 2002
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