A Systemic Approach to Modeling and Estimating the Demand for Money(Ies)

Posted: 13 Sep 2017

See all articles by Mauricio Calani

Mauricio Calani

Central Bank of Chile

Rodrigo Fuentes

Pontificia Universidad Católica de Chile

Klaus Schmidt-Hebbel

Pontifical Catholic University of Chile

Date Written: September 11, 2017

Abstract

This article uses a consumer theory-based systemic approach to model the demand for monetary liquid asset holdings in Chile. We implement the suggestions and caveats of aggregation theory for the estimation of a demand system for liquid assets (monies) in static, dynamic and time-varying parameters setups. Our results are robust and theoretically consistent with consumer theory restrictions, as a system derived from a utility maximizing framework and a quasi concave utility function. In our estimations, we find stability of interest rate elasticities, in contrast to previous related literature. We also document evidence that long (short) maturity rates are associated to less (more) liquid assets.

Keywords: SURE, semi-nonparametric, time varying parameters, money demand, LAIDS, monetary policy

JEL Classification: E52, E58, E43

Suggested Citation

Calani Cadena, Miguel Mauricio and Fuentes, Rodrigo and Schmidt-Hebbel, Klaus, A Systemic Approach to Modeling and Estimating the Demand for Money(Ies) (September 11, 2017). Applied Economics, Vol. 45, No. 16, 2013, Available at SSRN: https://ssrn.com/abstract=3035628

Miguel Mauricio Calani Cadena

Central Bank of Chile ( email )

1180 Agustinas St
United States
6702770 (Phone)

Rodrigo Fuentes

Pontificia Universidad Católica de Chile ( email )

Vicuña Mackena 4860
Macul
Santiago, Región Metropolitana 7820436
Chile

Klaus Schmidt-Hebbel (Contact Author)

Pontifical Catholic University of Chile ( email )

Av. Vicuna Mackenna 4860
Santiago
Chile

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