Econometric Tests of Alternative Scale Variables in Money Demand in Open Economies International Evidence from Selected OECD Countries

The Quarterly Review of Economics and Finance 39 (1999) 193–211

Fox School of Business Research Paper

19 Pages Posted: 17 Jun 2014

See all articles by Elyas Elyasiani

Elyas Elyasiani

Temple University - Department of Finance

Ali Zadeh

Susquehanna University - School of Business

Date Written: 1999

Abstract

The choice of the scale variable in the money demand function is important because of its striking implications on the magnitude and direction of the domestic monetary and fiscal policy effects and effectiveness of international policy coordination. In this study several tests are applied to the money demand functions of Japan, Germany, Canada, France, and Italy in an open economy context to determine the appropriate scale variable for each country. Both narrow and broad definitions of money are used. Income, disposable income, consumption, private spending, and domestic absorption are investigated as contenders for the scale variable. The findings indicate that the scale variable is country-specific, rather than universal, and it is sensitive to the definition of money.

Note: © 1999 Board of Trustees of the University of Illinois. All rights reserved.

Keywords: Money demand, Non-nested, Scale variable, OECD

Suggested Citation

Elyasiani, Elyas and Zadeh, Ali, Econometric Tests of Alternative Scale Variables in Money Demand in Open Economies International Evidence from Selected OECD Countries (1999). The Quarterly Review of Economics and Finance 39 (1999) 193–211; Fox School of Business Research Paper. Available at SSRN: https://ssrn.com/abstract=2451247

Elyas Elyasiani (Contact Author)

Temple University - Department of Finance ( email )

Fox School of Business and Management
Philadelphia, PA 19122
United States
215-204-5881 (Phone)
215-204-5698 (Fax)

Ali Zadeh

Susquehanna University - School of Business

Selinsgrove, PA 17870
United States

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