Thomas Elger: Department of Economics, Lund University, Postal: Department of Economics, School of Economics and Management, Lund University, Box 7082, S-220 07 Lund, Sweden
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.
34 pages, February 28, 2002
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