Breaks in the UK Household Sector Money Demand Function

22 Pages Posted: 30 Dec 2014

See all articles by Rakesh Bissoondeeal

Rakesh Bissoondeeal

Aston University - Aston Business School

Michail Karoglou

Aston University

Andy W. Mullineux

University of Birmingham

Date Written: December 2014

Abstract

We use non‐parametric procedures to identify breaks in the underlying series of UK household sector money demand functions. Money demand functions are estimated using cointegration techniques and by employing both the imple um and ivisia measures of money. P‐star models are also estimated for out‐of‐sample inflation forecasting. Our findings suggest that the presence of breaks affects both the estimation of cointegrated money demand functions and the inflation forecasts. P‐star forecast models based on ivisia measures appear more accurate at longer horizons and the majority of models with fundamentals perform better than a random walk model.

Suggested Citation

Bissoondeeal, Rakesh and Karoglou, Michail and Mullineux, Andy W., Breaks in the UK Household Sector Money Demand Function (December 2014). The Manchester School, Vol. 82, pp. 47-68, 2014, Available at SSRN: https://ssrn.com/abstract=2543872 or http://dx.doi.org/10.1111/manc.12043

Rakesh Bissoondeeal (Contact Author)

Aston University - Aston Business School ( email )

Aston Triangle
Birmingham, B47ET
United Kingdom

Michail Karoglou

Aston University ( email )

Aston Triangle
Birmingham, B4 7ET
United Kingdom

Andy W. Mullineux

University of Birmingham ( email )

Birmingham Business School
University House
Birmingham, B15 2TT
United Kingdom

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