Non-Linear Equilibrium Correction in Us Real Money Balances, 1869-1997
31 Pages Posted: 9 Apr 2002
Date Written: March 2002
Several theoretical models of money demand imply non-linear functional forms for the aggregate demand for money characterized by smooth adjustment towards long-run equilibrium. In this Paper, we propose a non-linear equilibrium correction model of US money demand, which is shown to be stable over the sample period from 1869 to 1997.
Keywords: Demand for money, adjustment costs, equilibrium correction, non-linear dynamics
JEL Classification: E41
Suggested Citation: Suggested Citation