The Stability of the Demand for Money and M1 Velocity: Evidence from the Sectoral Data
Posted: 18 Jul 2001
Abstract
Sectoral money demand functions are estimated using flow of funds data. Cointegrating relationships are found for household and (nonfinancial) busniness sectors. Estimated error-correction models for both sectors, however, exhibit parameter nonconstancy for time periods which roughly correspond with important financial innovations and deregulations. Thus, sectoral estimates of money demand relationships are consistent with the view that innovations and deregulation contribute to the nonstationarity M1 velocity.
JEL Classification: E41
Suggested Citation: Suggested Citation
Butkiewicz, James J. and McConnell, Margaret (Meg) Mary, The Stability of the Demand for Money and M1 Velocity: Evidence from the Sectoral Data. Available at SSRN: https://ssrn.com/abstract=6599
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