Results of econometric research - Monetary economy. Theory of money and credit

Results of econometric studies

And yet we managed to get something out!

Consider the most interesting empirical tests of the demand function for money.

The basic specification of the model is the following econometric equation:

where - the short-term interest rate of the money market - is taken as an alternative price of money; - long-term bond yield - is taken as the yield of alternative assets; - real demand for money in the current period; - the cumulative current real release; - the rate of inflation; - real demand for money in the previous period; - a random factor.

Until the mid-1970's. researchers received stable empirical results, some of which are presented in Table. 4.2 and 4.3.

Table 4.2

Empirical evaluation of the regression parameters of the demand function for money in the United States

Metric

Years

1952-1974

1952-1979

1952-1986

β 0

0.381

-0.313

-0.340

β 1

0.131

.039

0.047

β 2

-0.016

-0.013

-0.013

β 3

-0.03

-0.002

-0.003

β 4

-0.711

-0.889

-1,033

β 5

0.788

1.007

1.002

R 2

0.452

0.367

0.166

Table 4.3

International comparisons of the parameters of the demand function for money

Country

Years

β 1

β 2

β 3

β 4

Canada

1962-1985

.071

-0.004

-1.66

0.94

Japan

1966-1985

0.084

-0.005

-0.29

0.90

France

1964-1985

0.094

-0.002

-0.49

0.25

Germany

1969-1985

0.343

-0.005

-0.74

0.71

Italy

1971-1985

0.130

-0.004

-0.79

0.86

United Kingdom

1958-1986

0.118

-0.005

-0.69

0.44

Average

0.140

-0.004

-0.78

0.68

The results of empirical checks allow us to draw some conclusions about the nature of the demand for money in the modern economy.

First, the demand for money is elastic at a rate of interest, but ns is infinitely elastic. The percentage elasticity of the demand for money is limited.

- in absolute terms, the percentage elasticity of demand for money in the long-term period is higher than in the short-term, which indicates that there is a period of adaptation of money demand to a change in the interest rate.

Once elasticity does not take infinite and even very large values, this means that in these countries and in these periods of time there was no liquidity trap. Our prediction of the existence of a minimum interest rate is not confirmed.

Secondly, the elasticity of demand for money by income is approximately equal to one for the United States and less than one (though positive) for the UK. The positive scale effect is not confirmed for all countries.

Third, it was confirmed that there is a temporary lag between the changes in the interest rate and income and the corresponding adjustment of the demand for money, which is approximately three quarters in the first year of the change. In addition, it was calculated that 90% of the adaptation is carried out within two years.

Question for reflection

Since the 1980s. the demand function for money shows a strong instability, so some researchers (for example, Goodhart) call this process the "disappearance of money". What do you think, with what it can be connected?

Conclusions

Let's sum up. There are two principal approaches to the analysis and formation of the demand function for money. The macroeconomic approach (the quantitative theory of money, the Cambridge equation, the M.Fridman theory and the Keigan theory) is based on macroeconomic models of the economy, looking for factors that indicate how much money economic agents are willing to collectively hold as a liquidity. The microeconomic approach (the Baumol-Tobin model, the precautionary model model, the Tobin model, the shopping time model) proceeds from the optimal choice of the individual participant in the transaction, analyzing the motives for which people would like to own money.

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