evidence on nonlinear error correction in money demand the case of taiwan this paper proposes a nonlinear error correction model based upon smooth transition regression methodology the model is specified such that the short run adjustment toward long run equilibrium is nonlinear and that the error correction is a smooth function of long run deviation empirical results obtained from estimating m2 money demand in taiwan support the hypothesis of a nonlinear error correction process and provide better interpretation of change in the demand for money

rain and the democratic window of opportunity according to the economic approach to political transitions negative transitory economic shocks can give rise to a window of opportunity for democratic change we examine this hypothesis using yearly rainfall variation over the 1980 2004 period in 41 sub saharan african countries we find that a 25 drop in rainfall increases the probability of a transition to democracy during the following two years by around 3 percentage points a 5 fall in income due to low rainfall raises the probability of democratization by around 7 percentage points we also find that rainfall does not affect transitions from democracy to autocracy

the demand for money in eec countries abstract this paper examines the demand for money in the eec countries and is focussed on five issues first it starts form a common economic framework which allows for shifts from m 2 to non money assets and vice versa second special attention is given to the dynamic structure of the statistical model in order to obtain meaningful conclusions on e g the speed of adjustment of actual to optimal money holdings third the study is entirely based on a uniform set of quarterly data for the eight countries concerned fourth the paper presents a careful examination of the residuals and finally analyses the predictive behaviour of the estimated models for all countries we found long run income elasticities greater than unity and interest rate elasticities clustered around 0 20 the impact of inflation and the business cycle variable appeared to be significant in the majority of countries considered

weak instruments diagnosis and cures in empirical econometrics what is the weak instruments wi problem and what causes it universal agreement does not exist on these questions we define weak instruments by two features i two stage least squares 2sls analysis is badly biased toward the ordinary least squares ols estimate and alternative unbiased estimators such as limited information maximum likelihood liml may not solve the problem and ii the standard first order asymptotic distribution does not give an accurate framework for inference thus a researcher may estimate bad results and not be aware of the outcome the cause of wi is often stated to be a low r or f statistic of the reduced form equation in the most commonly occurring situation of one right handside endogenous variable we find the situation is more complex with an additional factor the correlation between the stochastic disturbances of the structural equation and the reduced form that needs to be taken into account we discuss in this paper a specification test hahn and hausman 2002a for wi a caution against using no moments estimators such as liml in the wi situation and suggestions for different estimators an approach to inference of frank kleibergen 2002 for wi we end with a caution of how small biases can become large biases in the wi situation we begin with the limited information structural model under the assumptions of hausman 1983

modeling monetary trends in italy using historical data the demand for broad money 1861 1990 in this paper we estimate a stable demand for money relationship for italy using a long series of historical data we extend previously available data sets to obtain a sample for the years 1861 to 1990 and use cointegration analysis and two stage estimation procedures to obtain a dynamic model for m2 demand by employing a small number of explanatory variables and a nonlinear error correction model we find a stable demand for money relationship our model incorporates significant inflation and interest rate effects in contrast to previous studies of this type

measuring poverty in a growing world or measuring growth in a poor world the extent to which growth reduces global poverty has been disputed for 30 years although there are better data than ever before controversies are not resolved a major problem is that consumption measured from household surveys which is used to measure poverty grows less rapidly than consumption measured in national accounts in the world as a whole and in large countries particularly india china and the united states in consequence measured poverty has fallen less rapidly than appears warranted by measured growth in poor countries one plausible cause is that richer households are less likely to participate in surveys but growth in the national accounts is also upward biased and consumption in the national accounts contains large and rapidly growing items that are not consumed by the poor and not included in surveys so it is possible for consumption of the poor to grow less rapidly than national consumption without any increase in measured inequality current statistical procedures in poor

income shocks consumption wealth and human capital evidence from russia abstract using the russia longitudinal monitoring survey this article investigates how russian households consumption responds to income shocks and in particular how household wealth and human capital affect the households ability to smooth consumption an instrumental variable estimation method with household fixed effects is implemented after correcting for potential problems of sample attrition using the inverse probability weighting method the article finds that household consumption in russia is only partially protected from idiosyncratic shocks the analysis also provides evidence that wealthier households can better smooth their consumption furthermore changes in income have less impact on consumption when households have members with higher education levels wealth effects are more pronounced in rural areas while education effects are stronger for urban households

the demand for m1 in the u s a 1960 1988 estimated u s m1 demand functions appear unstable regularly breaking down over 1960 1988 e g missing money great velocity decline m1 explosion we propose a money demand function whose arguments include inflation real income long term bond yield and risk t bill interest rates and learning curve weighted yields on newly introduced instruments in m1 and non transactions m2 the model is estimated in dynamic error correction form it is constant and with an equation standard error of 0 4 variance dominates most previous models estimating alternative specifications explains earlier breakdowns showing the model s distinctive features to be important in accounting for the data

financial development and economic growth in south korea an application of smooth transition error correction analysis this article investigates the influences of financial development on economic growth for south korea the analysis is performed using an error correction model and a nonlinear smooth transition error correction technique empirical results from the cointegration test reveal that there is a long run equilibrium relationship among financial development and economic growth we also demonstrate that the nonlinear specification is more appropriate than the linear model and confirm the presence of nonlinearity in the aggregate output furthermore we find that the short run effect of financial development on economic growth is unstable despite the positive long term effect

recent instability of the demand for money an international perspective aggregate money demand functions once an apparent bulwark for macroeconomic research have had to be re examined in the light of the events and discoveries of the 1970s following goldfeld s extensive analysis it now is widely recognized that the demand for mi balances in the united states cannot be explained satisfactorily by standard functions apparently because of shifts occurring in the early 1970s similar reservations see below have been expressed with respect to m3 balances in the united kingdom where the demand relationships appear to have been upset by the introduction of regulatory reforms in 1971 in both cases part of the problem can be traced to specific events but the possibility remains that a more general instability may be present the rapid inflation experienced by all major industrial countries after 1973 the concurrent collapse of the bretton woods system of fixed exchange rates and the attempts by most major central banks to control growth in domestic money stocks may all have altered the responses of the demand for money to the standard functional arguments this paper presents a range of stability tests for a set of demand functions estimated for two monetary aggregates in each of six countries in order to determine whether money demand functions more generally have been stable over the recent period and to attempt to identify the nature and causes of any observed instabilities the major conclusions are that none of the other functions examined displays instabilities as severe as those of the mi function for the united states and that the latter may be unstable in a more persistent and fundamental way than has heretofore been recognized the equations estimated for this study are based on a variant of goldfeld s log linear real balances function the deflated value of money balances is related to real income interest rates and inflation with lagged adjustments introduced via a simple koyck transformation this function obviously is in a simplified form especially with respect to the lag struc

the long run stability of the demand for money italy 1861 1996 this paper examines the stability of the demand for money in italy using a newly extended data set for the period 1861 1996 we examine how the evolution of the financial system in italy and policy shifts have affected the behavior of the long run demand for money and present tests of structural stability we find the demand for broad money to be remarkably stable despite periods of considerable economic turbulence in addition we present evidence on the monetary transmission mechanism our results shed light on attempts to model long run relationships in other countries such as the uk and the us

long run money demand in taiwan revisited evidence from a cointegrating str approach previous studies on the nonlinearity of the money demand function focus only on short run dynamics and assume that the long run cointegrated relationship is linear which according to economic theory need not be the case thus this article focuses on the variables that make up the long run money demand function in taiwan and their determinants by using the cointegrating smoothing transition regression cstr test developed by choi and saikkonen 2004 this model is more general than the previous str model in that it may contain several transition functions and has more than a single transition variable we demonstrate our empirical results for robustness and adopt two models to ascertain whether or not the stock price should be added as a determinant of the demand for money our empirical results show the existence of a stationary long run relationship among real money demand functions for the period from 1976q1 to 2005q1 and the robustness test covers the 1980q1 2005q1 period in taiwan by comparing

money demand instability expectations and policy regimes a note on the case of italy 1964 1986 abstract this paper compares the stability performance of feedback and feedforward specifications of the demand for m2 in italy over the period 1962 1986 a clear change in the monetary policy regime occurred in 1969 1970 together with marked breaks in the processes generating several relevant variables in the mid 70s making this period particularly appropriate for the investigation of the potential role of expectations our main results show that the feedback specification suffers from instability at both relevant dates whereas the feedforward specification is remarkably stable during the policy regime change but displays signs of instability during the mid 70s

determinants of democracy a panel study of over 100 countries from 1960 to 1995 finds that improvements in the standard of living predict increase in democracy as measured by a subjective indicator of electoral rights the propensity for democracy rises with per capita gdp primary schooling and a smaller gap between male and female primary attainment for a given standard of living democaracy tends to fall with urbnization and with a greater reliance on natrual resources democracy has little relation to country size but rises with the middle class share of income the apparently strong relation of democracy to colonial heritage mostly disappears when the economic variables are held constant similarly the allowance for these economic variables weakens the interplay between democracy and religious affiliation however negative effects from muslim and non religious affiliations remain intact

using weather variability to estimate the response of savings to transitory income in thailand this paper measures the extent to which farmers are able to use savings and dissavings to smooth consumption in response to unexpected shocks to income time series information on regional rainfall is used to construct estimates of transitory income due to rainfall shocks the relationship between these measures of transitory income and savings indicates that farm households save a significantly higher fraction of transitory income than nontransitory income jel d91 016 the incomes of farm households in developing countries are notorious for being both low and uncertain policies that increase the incomes of farmers may well be different

trends in rainfall and economic growth in africa a neglected cause of the african growth tragedy abstract we examine the role of rainfall trends in poor growth performance of sub saharan african nations relative to other developing countries using a new cross country panel climatic data set in an empirical economic growth framework our results show that rainfall has been a significant determinant of poor economic growth for african nations but not for other countries depending on the benchmark measure of potential rainfall we estimate that the direct impact under the scenario of no decline in rainfall would have resulted in a reduction of between around 15 and 40 of today s gap in african gdp per capita relative to the rest of the developing world

testing for the stability of money demand in italy has the euro influenced the monetary transmission mechanism stability of money demand is a crucial issue for the efficacy of monetary policy this is particularly true in the presence of significant exogenous shocks to the monetary system by implementing the most recent econometric testing procedures this article intends to investigate the consistency of the stability of money demand in italy one of the larger european monetary union emu countries before and after the emu among others the objective is indeed to ascertain the effect of a change in the currency regime on the monetary aggregates and to provide a valid empirical model which is a viable tool for policy performance

estimation of elasticity price of electricity with incomplete information abstract the sharp increase in energy prices and growing concern for environmental issues among other things are behind the renewed interest in energy demand estimation however there is scarce academic literature that takes real situation of energy suppliers into account high quality but incomplete data in this paper we propose a useful and rather simple instrument for estimating electricity demand with the incomplete and or imperfect data currently available to suppliers in particular using real expenditure and consumption data on electricity we employ a model of random effects for panel data to estimate residential and industrial electricity demand in spain

a brief review of some problems in using national accounts data in level of output comparisons and growth studies abstract after an initial burst of enthusiasm for establishing their national accounts 30 or 40 years ago some countries have made continuous improvements while others have done little to maintain even their initial system presently most developing countries make their basic estimate of gdp from the production side and most do not have adequate surveys to permit a consistency check of their production and expenditure side estimates the base surveys for expenditures and production are typically over ten years old and the lags in basic surveys for constructing constant price estimates are frequently longer a number of countries estimate their growth from a weighted average of volume indexes and make no attempt at direct deflation many of those that do deflate their current expenditure estimates do so at a very aggregate level users of national accounts should be aware of the varying quality of the estimates across countries and hopefully continual questioning of the numbers will help to encourage improvement

cointegration and dynamic time series models abstract this paper provides a survey of some of the recent developments in the field of econometric modelling with cointegrated time series in particular we describe the testing and estimation procedures which have become increasingly popular in the recent applied literature in addition to the two stage procedure proposed by engle and granger we consider extensions to the modelling of dynamic models with cointegrated variables such as the estimation of models with multiple cointegration vectors simultaneous systems models with seasonally integrated and cointegrated variables furthermore we illustrate the practical application of the techniques describes in the paper by means of a tutorial data set

the long run behavior of the income velocity of money in five advanced countries 1870 1975 an institutional approach the income velocity of money in canada the united states great britain norway and sweden displays a u shaped pattern over the last one hundred years this paper presents and tests empirically an explanation for this secular pattern emphasizing the influence on velocity of institutional changes the inclusion into a simple velocity function of institutional developments such as the process of monetization the spread of commercial banking financial development and the growth of economic stability improves the explanation of long run movements in velocity provided by a regression of velocity on real permanent income per head and the interest rate