demand for money in open economies abstract the demand for real cash balances deduced from an underlying portfolio model of the financial market is shown to depend upon domestic variables and foreign monetary developments the model is estimated using quarterly postwar data for canada germany uk and us there is clear evidence that demand for money is affected not only by changes in domestic variables such as permanent income domestic interest rate and price expectations but also by fluctuations in exchange rate expectations and foreign interest rates the conclusion that domestic monetary policy is fairly ineffective and domestic financial markets are highly vulnerable to changes in foreign financial and monetary developments need to be modified in light of the results presented in this paper

time varying smooth transition autoregressive models nonlinear regime switching behavior and structural change are often perceived as competing alternatives to linearity in this article we study the so called time varying smooth transition autoregressive tv star model which can be used both for describing simultaneous nonlinearity and structural change and for distinguishing between these features two modeling strategies for empirical specification of tv star models are developed monte carlo simulations show that neither of the two strategies dominates the other a specific to general to specific procedure is best suited for obtaining a first impression of the importance of nonlinearity and or structural change for a particular time series a specific to general procedure is most useful in careful specification of a model with nonlinear and or time varying properties an empirical application to a large dataset of u s macroeconomic time series illustrates the relative merits of both modeling strategies

the demand for money in an open economy the united kingdom most previous studies have estimated the demand for money without paying too much attention to developments in the foreign exchange markets in light of the fact that any development abroad and in the foreign exchange markets could have implications for domestic stabilization we make an attempt to incorporate such developments into the demand for money in the united kingdom more precisely after incorporating a measure of real effective exchange rate of the british pound into a dynamic money demand function we estimated it for the uk using quarterly data over 1973 87 period by relying upon the akaike final prediction error criteria to select the optimum number of lags it is shown that in addition to income and interest rate the real effective exchange rate exerts significant effect on the uk demand for money in the short run as well as long run

investigating m3 money demand in the euro area abstract euro area monetary growth has exceeded its target since 2001 likewise recent empirical studies did not find evidence in favour of a stable long run money demand function in contrast to the bulk of the literature we are able to identify a stable long run money demand relationship this result is obtained when the analysis is done without the short run homogeneity restriction between money and prices the basic equation can be improved by allowing for asymmetric adjustment in a low inflation environment opportunity costs of holding money have decreased thus the apparent monetary overhang is reconciled within standard models

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

currency substitution policy rule and pass through evidence from turkey in this article we analyse empirically currency substitution and exchange rate pass through in the turkish economy where their ongoing presence could undermine the implementation of a successful monetary policy especially in a flexible exchange rate regime even though a considerable time has passed after the implementation of a flexible exchange rate regime in turkey by using vector error correction model for the period from 1987 to 2004 we find that the currency substitution and exchange rate pass through still have importance in the turkish economy and the monetary policy stance has been considerably strong possibly as a response of ongoing presence of them if this is the case to avoid the undesired consequences of this strong monetary policy turkey should consider some policy measures to reduce the degree of pass through and currency substitution

estimating money demand functions the question of which functional forms of money demand regression equations are useful for empirical work is addressed here specifically it is argued that a functional form that focuses attention on the ability of the growth rate of nominal money to predict the inflation rate is a useful way of summarizing empirical evidence on the existence of a stable money demand function the results of estimating and simulating this functional form as well as standard functional forms are presented in the final part of this paper a typical equation expressing the public s demand for real money balances m is as follows

non linear target adjustment in corporate liquidity management an endogenous thresholds approach we provide new empirical evidence on nonlinear liquidity management in dutch firms our results reveal that liquidity adjustment from below the target is significantly faster than from above we find no evidence for bands of inaction around the target

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

indirect carbon emissions in household consumption evidence from the urban and rural area in china abstract resident energy consumption can be divided into direct and indirect parts and the indirect part is often considered to be much more important than direct part by some scholars in this paper on the basis of consumer lifestyle approach cla and the estimation of net primary productivity npp energy ecological footprint eef of indirect energy consumption is calculated using statistical data of chinese urban and rural areas from 1999 to 2010 and then improved stirpat stochastic impacts by regression on population affluence and technology model is used to empirically study the influences of urbanization level economic level engel coefficient energy intensity and industry structure on indirect energy consumption given the consideration of potential multicollinearity the model is estimated using partial least square pls regression the results indicate that for urban residents the eef of indirect energy use is on the rise it is positively influenced by urbanization level per capita income and the ratio of tertiary industry but negatively influenced by engel coefficient and energy intensity for rural residents the eef is declining it is positively influenced by engel coefficient energy intensity and tertiary industry proportion while negatively influenced by urbanization level and per capita income combining these empirical findings and china s specific circumstances some policy recommendations are made

strategic self dispatch considering ramping costs in deregulated power markets ramp rates of generators are generally specified within elastic range of the strength of the shaft to safeguard the rotor from fatigue these limits can however be exceeded albeit at the risk of reducing the rotor life such effects on the rotor life can be compensated by incorporating appropriate ramping costs power demand and power price in deregulated power markets have shown a tendency of sudden wide excursions over short intervals of time the ability to respond to such fast change in demand and price can be quite rewarding this provides the motivation to utilize the ramping rates beyond traditional elastic limits this paper studies the strategic use of ramping rates beyond elastic limits in a power producer s self dispatch in a power market with price and demand volatility a set of ramping processes has been developed from ramping cost versus ramping time relationships to derive the total operation cost including ramping costs for various levels of ramping rates exceeding elastic limits a thorough theoretical analysis has been conducted for the selection of the optimal ramping process under different conditions a numerical example is presented to highlight the potential benefits from the optimal use of these ramping processes it is seen that the benefit from the strategic use of ramp rates beyond elastic limits not only depends on the high price in the power market but also on the initial loading of the generator which limits the capacity available for dispatch

analyzing the impact factors of energy related co2 emissions in china what can spatial panel regressions tell us abstract china produces a huge amount of co2 emissions that need to be reduced to comply with international commitments identifying the driving factors is critical for achieving mitigation targets and transiting toward a low carbon economy in china this study is one of the first few attempts to apply panel data and spatial econometrics models to analyze the spatial dependence of province level co2 emission intensity and the economic drivers of such emissions first we conducted a systematical review of the development of spatial econometrics second we generated a panel data set about energy and socioeconomic development of 30 provinces and municipalities in china from 2005 to 2012 next we chose the most appropriate model to explain the predominant factors of energy related co2 emissions based on a series of tests of the spatial econometrics models the results suggested that technology improvement adjustment of industrial and energy structures and environmentally friendly behaviors and patterns of consumption of habitants play an important role in co2 emissions mitigation the results also revealed that co2 emissions had strong spatial spillover effects which indicate that policies adopted in one province will affect policy making in neighboring provinces implying that provinces need take combined action to balance climate change mitigation and economic policy goals

the behavior of money and other economic variables two natural experiments abstract the object of this paper is to test the performance of the quantity theory model and the related proposition of monetary neutrality in a context in which to use bernanke s phraseology money move d for reasons that were plausibly unrelated to the current state of the economy we investigate this question using data from two recent episodes of monetary policy regime change the move to floating exchange rates throughout the industrialized world following the breakdown of bretton woods in the early 1970s and the shift toward less expansive monetary policy that to varying degrees took place in these countries a decade or so later the results of this exercise are highly positive the money price relationship that we observe is fully consistent with theory growth shifts in the nominal stock of money and in the price level are highly correlated and bear a one to one relation to one another growth shifts in exchange rates are significantly related both to growth shifts in relative price levels and to growth shifts in relative excess supplies of money the classical neutrality proposition in this context superneutrality in general receives strong though not totally unambiguous support

investigating m3 money demand in the euro area new evidence based on standard models monetary growth in the euro area has exceeded its target level especially since 2001 likewise recent empirical studies did not find evidence in favour of a stable long run relationship between the variables entering the money demand function instead the equation appears to be increasingly unstable if more recent data are included since the link between money balances and macroeconomic variables seems to has become rather fragile these results put serious doubts concerning the rationale of monetary aggregates in the monetary policy strategy of the ecb however if the analysis is done without imposing a short run homogeneity restriction between money and prices a stable long run money demand relationship can be identified where recursively estimated parameters are almost stable in addition the corresponding error correction model survives a wide array of specification tests including procedures for nonlinearities and parameter instability hence the apparent monetary overhang is in line with standard models of money demand behaviour and is not expected to lead to a rise in inflation

a general framework for predicting returns from multiple currency investments abstract this paper examines the ability of several popular forecasting models to predict future returns on financial assets denominated in the five major reserve currencies the paper generalizes the autoregressive conditional heteroskedasticity arch model by relaxing some of the underlying restrictive assumptions forming what we call extended arch models the paper uses this generalization as well as general versions of the random coefficient rc model in order to predict the rates of return out of sample predictions based on these models are generated and compared with those of a random walk process and a univariate arch model the main implication of the results is that while direct arch estimation can improve on forecasts made on the basis of a random walk model even better forecasts can be made by generalizing the arch process by allowing the coefficients to be time varying thus the paper provides an empirical implementation of recent work that suggests a method for computing optimal multiple currency mean variance portfolios

how might china achieve its 2020 emissions target a scenario analysis of energy consumption and co2 emissions using the system dynamics model abstract according to the chinese government s co 2 reduction commitment the production and consumption of traditional and renewable energy in china from 2001 to 2012 this paper forecasts the energy consumption gross co 2 emissions and co 2 emission intensity in china from 2013 to 2020 via system dynamics simulation coupled with the energy system and renewable energy policy factors the effects of different economic growth rates and policy factors on the energy consumption were estimated the results showed that in different economic growth rates scenarios total energy consumption and co 2 emissions increased by 36 140 75 kwh and more than 10 000 billion kg in 10 gdp growth rate scenario than in the 7 scenario in 2020 the co 2 emission per gdp decreased by 52 in 2020 as compared to 2005 under the scenario of 10 gdp growth rate under different renewable energy policy factors scenarios the coal energy consumption decreased by 2 3 in scenario of 5 policy factor as compared to 1 policy factor scenario the co 2 emissions reduced by 3321 94 billion kg in 2020 under the scenario of 5 policy factor as compared to that in the scenario of 1 policy factor the co 2 emission per gdp reduced by 47 50 based on the 2005 level in different scenarios of renewable energy policies we found that with an increase in gdp total energy consumption and co 2 emissions increased in the base scenario higher economic growth rates led to an increase in energy consumption including both the traditional and renewable energy resources in stark contrast to total co 2 emission however co 2 emission intensity decreased with an increase in economic growth rate the renewable energy policy improved the renewable energy development reduced co 2 emissions and co 2 emission intensity it was more effective in energy saving and co 2 reduction than the high growth rate scenarios the results indicated that china is highly likely to achieve its co 2 emission reduction goal under different simulated scenarios besides the energy distribution was similar in different scenarios coal was the major energy source which amounted to more than 70 of the total energy consumption finally we conclude with important policy implications according to our simulations results

exchange rate sensitivity of the demand for money in spain 1998 exchange rate sensitivity of the demand for money in spain applied economics vol 30 no 5 pp 607 612

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

co2 emissions and poverty alleviation in china an empirical study based on municipal panel data abstract industrial transition and climate change regulation to reduce co2 emissions will affect employment and further influence social poverty in this study we measured co2 emissions and the poverty alleviation index based on socio economic and energy consumption statistic data from 286 municipal cities in china for 2007 2014 analyzed relationships between co2 emissions employment rate and poverty alleviation index using simultaneous equations and interpreted the mechanism by which co2 emissions influence social poverty at the municipal level the results indicate that average co2 emissions from china increased by 32 9 with a rapid initial rise and then steady growth from 2007 to 2014 while the average poverty alleviation index increased by 25 19 during the same period co2 emissions had a significant positive relationship with employment rate in all industries in addition employment rate was negatively correlated with poverty alleviation in primary industry and positively correlated with poverty alleviation in non agricultural industry studying the mechanisms for co2 emission impacts on poverty alleviation can provide important references for adapting to global climate change promoting sustainable development and safeguarding the legitimate development rights of all countries especially developing countries

the impact of economic and monetary uncertainty on the demand for money in emerging economies by introducing uncertainty monetary volatility and economic volatility are said to make the public cautious hence increase their cash holdings or their demand for money on the other hand because of monetary and economic uncertainty if the public seek safer assets than money they may hold less cash in the absence of any paper testing for the impact of economic and monetary uncertainty on the demand for money in emerging economies this article fills the gap by considering the experiences of six central and eastern european emerging economies and four other emerging economies we found that the impact is transitory in most countries moreover money demand is found correctly specified and stable in most countries suggesting that policy based on monetary targeting could still be effective despite significant output and monetary uncertainty

stability of the money demand function in asian developing countries previous studies that estimated the money demand function in asian developing countries either employed traditional estimation techniques or recently popularized cointegration technique while the first group suffers from spurious regression problems the second group interpreted their finding of cointegration as a sign of stability of estimated parameters this study after incorporating the cusum and cusumsq tests into cointegration analysis shows that in some asian countries even though real m1 or m2 monetary aggregates are cointegrated with their determinants the estimated parameters are unstable

energy delivery capacity and generation scheduling in the deregulated electric power market the generation schedules obtained in traditional hydrothermal scheduling or unit commitment programs are in hourly generation levels in the new deregulated power market the power transactions are processed in terms of hourly energy delivery failing to fulfil scheduled energy delivery may result in a penalty to the power producers this paper shows that although ramp rate constraints are satisfied in hydrothermal scheduling taking a generation level schedule as an energy delivery schedule may not be realizable based on the maximum principle in optimal control theory the energy delivery capacity across the scheduling horizon is established as a set of recursive equations with given ramp rate constraints a sufficient and necessary condition is obtained to check if an energy delivery schedule is realizable based on this condition two cases where ramp rate constraints are both satisfied are analyzed and an unrealizable energy delivery schedule is observed

investigating stability and linearity of a german m1 money demand function starting from a linear error correction model ecm the stability and linearity of a german m1 money demand function are investigated applying smooth transition regression techniques using seasonally unadjusted quarterly data from 1961 1 to 1990 2 it is found that the money demand equation considered is both linear and stable after extending the sampling period until 1995 4 a clear structural instability due to the monetary unification on 1 july 1990 is found and subsequently modelled a non linear specification for the extended period is presented and discussed copyright 1999 john wiley sons ltd

effects of exchange rate flexibility on the demand for international reserves abstract we incorporate a measure of exchange rate flexibility into the standard reserve demand equation and present empirical results for the 1976 1985 period which are consistent with the work of officer 1976 and frenkel and jovanovic 1981 indicating the existence of economies of scale and the demand for reserves

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

how stable is the demand for money in emerging economies one of the key elements of implementing the monetary policy is stability of the demand for money the literature includes a large number of studies that have tested the stability of the money demand in developed as well as less developed countries but not in emerging economies of eastern europe as market based data becomes available from these countries there is an urgency to test old theories for these modern market oriented economies in this article we consider the experiences of armenia bulgaria the czech republic hungary poland russia and the slovak republic using the bounds testing approach to error correction modelling and cointegration we show that money demand is stable in these countries

do exchange rate changes have symmetric or asymmetric effects on the demand for money in turkey as a result of the research conducted by nobel laureate robert mundell 1963 most studies estimating the demand for money today do include the exchange rate in their specification to account for currency substitution previous studies that did this for the turkish demand for money assumed that exchange rate changes do have symmetric effects on the demand for money in turkey in this article we question this assumption by using the nonlinear ardl approach we show that indeed exchange rate changes do have short run and long run asymmetric effects on the m1 demand for money introducing nonlinearity also yields a stable money demand

a security constrained bid clearing system for the new zealand wholesale electricity market this paper reports upon the mathematical models and implementation of the scheduling pricing and dispatch spd application for the new zealand electricity market nzem spd analyzes bids for energy offers reserve offers and energy demands and recognizes explicitly the effects on bid clearing due to transmission congestion network losses reserve requirements and ramp rate limits advanced lp solution methods are utilized to solve the large scale constrained optimization problem results on a 67 bus test system and the nzem are included

economic policies and demand for money evidence from canada this study identifies canadian fiscal and monetary policy regime changes that could influence the services of money it is argued that if these policy regime changes were not incorporated in the estimation of demand for real balances the resulting estimate would be biased and unstable using canadian monthly data for the january 1975 to june 2001 period the paper estimates a standard demand for money m1 function with and without these policy regime changes it was found the demand for money in canada is stable over the short and long run periods when these policy regime changes are incorporated and the estimated coefficients have correct signs

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

aggregate vs disaggregate data analysis a paradox in the estimation of a money demand function of japan under the low interest rate policy we use japanese aggregate and disaggregate money demand data to show that conflicting inferences can arise the aggregate data appears to support the contention that there was no stable money demand function the disaggregate data shows that there was a stable money demand function neither was there any indication of the presence of a liquidity trap possible sources of discrepancy are explored and the diametrically opposite results between the aggregate and disaggregate analysis are attributed to the neglected heterogeneity among micro units we provide necessary and sufficient conditions for the existence of a cointegrating relation among aggregate variables when heterogeneous cointegration relations among micro units exist we also conduct simulation analysis to show that when such conditions are violated it is possible to observe stable micro relations but unit root phenomena among macro variables moreover the prediction of aggregate outcomes using aggregate data is less accurate than the prediction based on micro equations and policy evaluation based on aggregate data ignoring heterogeneity in micro units can be grossly misleading copyright 2005 john wiley sons ltd

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 equilibrium relationship among money income prices and interest rates evidence from a threshold cointegration test the long run equilibrium relationship among money income prices and interest rates in japan is investigated by the threshold cointegration test which allows for asymmetric adjustment introduced by enders and siklos 2001 the threshold cointegration approach provides clear evidence of the cointegration relationship characterized by asymmetric adjustment by allowing for asymmetric adjustment results are obtained showing the stability of the money demand function similar to lucas 1988 who pointed out that the money demand function is stable if unit income elasticity is imposed in particular the estimated results show that the adjustment process toward equilibrium is highly persistent above an appropriately estimated threshold whereas the adjustment process toward equilibrium quickly converges below it this finding indicates that deviations from equilibrium resulting from increases in money or decreases in income and prices are highly persistent

characterizing nonlinearities in business cycles using smooth transition autoregressive models during the past few years investigators have found evidence indicating that various time series representing business cycles such as production and unemployment may be nonlinear in this paper it is assumed that if the time series is nonlinear then it can be adequately described by a smooth transition autoregressive star model the paper describes the application of these models to quarterly logarithmic production indices for 13 countries and europe tests reject linearity for most of these series and estimated star models indicate that the nonlinearity is needed mainly to describe the responses of production to large negative shocks such as oil price shocks

spillover effects of economic globalization on co2 emissions a spatial panel approach abstract this paper investigates the spatial effects of economic globalization on co2 emissions in a panel of 83 countries over the period 1985 2013 we apply the spatial panel method to address the problems of spatial dependency and the spillover effect among neighboring countries first the estimation results verify the existence of the spatial correlations in co2 emissions across nations second we find that the indirect effect of economic globalization on co2 emissions is so significantly negative to overcome the positive direct effect which implies a negative and significant total effect so our results suggest that being surrounded by highly globalized countries has a positive effect on the environmental quality finally we also find strong evidence for the inverted u shaped ekc relationship between co2 emissions and income

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

size distortions of tests of the null hypothesis of stationarity evidence and implications for the ppp debate abstract tests of the null hypothesis of stationarity against the unit root alternative play an increasingly important role in empirical work in macroeconomics and in international finance we show that the use of conventional asymptotic critical values for stationarity tests may cause extreme size distortions if the model under the null hypothesis is highly persistent this fact calls into question the use of these tests in empirical work we illustrate the practical importance of this point for tests of long run purchasing power parity ppp under the recent float we show that the common practice of viewing tests of stationarity as complementary to tests of the unit root null will tend to result in contradictions and in spurious rejections of long run ppp while the size distortions may be overcome by the use of finite sample critical values the resulting tests tend to have low power under economically plausible assumptions about the half life of deviations from ppp thus the fact that stationarity is not rejected cannot be interpreted as convincing evidence in favor of mean reversion only in the rare case that stationarity is rejected do size corrected tests shed light on the question of long run ppp

the demand for broad money in the united kingdom 1878 1993 using annual data from friedman and schwartz 1982 hendry and ericsson 1991a developed an empirical model of the demand for broad money in the united kingdom over 1878 1975 we update that model over 1976 1993 accounting for changed data definitions and clarifying the concept of constancy with appropriate measures of opportunity cost and credit deregulation the model s parameters are empirically constant over the extended sample which was economically turbulent policy implications follow for parameter nonconstancy and predictive failure causation between money and prices monetary targeting deregulation and financial innovation and the effect of policy on economic agents behavior

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

a study of basic bidding strategy in clearing pricing auctions this paper models bidding behaviors of suppliers in electricity auction markets under clearing pricing rule and with some simplified bidding assumptions optimal bidding strategy of suppliers is derived by solving a set of differential equations that specify the necessary conditions for bidders to maximize their expected payoffs the derived result indicates that bidders have incentives to mark up their bids above their costs of production the amount of markup depends on the probability of winning below and on the margin that are computed from the cost distribution of all suppliers market demand and the number of suppliers participating in the auction

modeling the demand for m3 in the unified germany an error correction model for the demand for real m3 money is constructed for the period of 1976 1994 with real gnp the gnp deflator as well as a short term and a long term interest rate as explanatory variables quarterly seasonally unadjusted data are used in estimating the model it is found that there is a clear structural break due to the german unification in 1990 on the other hand once this structural break is accounted for a stable relation is found which resists a series of specification tests these include a number of recent tests of parameter constancy and linearity our specification is at variance with findings reported by some other researchers notably the deutsche bundesbank

revisiting the us money demand function an application of the lagrange multiplier structural break unit root test and the bounds test for a long run relationship in this article we examine the issue of a levels relationship and stability of the us money demand function over the period 1959 01 to 2004 02 we use the lagrange multiplier structural break unit root test and the bounds testing approach to a long run relationship in levels of the variables namely real money demand nominal interest rate and real income we find greater evidence for a long run relationship in levels and stability of the us money demand function when we use m2 as a proxy for money demand however we find little evidence for a long run relationship between m1 and m2 with their determinants for the recent period spanning the last decade or so

microfoundations and the demand for money the reader should note that i write this piece in a style that aims to be accessible to that much neglected representative agent the woman on the eurostar train hence unlike the man on the clapham omnibus i assume my intrepid traveller has reasonable knowledge of monetary economics and econometrics but not of the details of the demand for money space constraints force me to indulge in a certain amount of poetic licence but i hope this results in poetic justice there have been many wars fought on this particular battlefield some with almost religious zeal on the theoretical side of the debate we sometimes have the equivalent of religious fundamentalists be they muslims jews christians etc who would dismiss almost any evidence unless it were associated with a strong microtheoretic basis as laid down in the koran talmud or bible the empirical side encompasses agnostics atheists as well as born again econometricians pure theorists inhabit the sunlit uplands while applied economists and policymakers flounder in the muddy plain below occasionally gaining solace from their copy of zen and the art of motorcycle maintenance in general in economics we do not have the luxury of controlled experiments as is the case in the natural sciences what distinguishes good microfoundations from bad and how to weight priors and statistical evidence is subject to much dispute leamer i983 hendry et al i990 as in religion sometimes there is the occasional miracle proclaimed after a suitable interval a new saint may be declared and disciples flock to the new shrine later doubts may arise as to whether a miracle really did occur human behaviour is difficult to explain let alone predict so the search for the equivalent of the holy grail ark of the covenant etc is bound to be arduous in scholarly journals we generally read of the success of the demand for money like diplomats who are sent abroad to lie for the good of their country publication may require applied economists to be somewhat economical with the actualite lovell i983 leamer i983 in this article i want to be as honest as possible about our success and failures in this area the prior information an armchair economist would consider when thinking about the demand for money over the past 40 years in western industrialised countries which have experienced moderate inflation might

milton friedman s monetary economics and the quantity theory tradition abstract this article provides a selective review of milton friedman s contributions to monetary economics focusing on five areas in particular the demand for money the joint historical and empirical work with anna j schwartz the theoretical and empirical analyses of the phillips curve monetary policy and monetary dynamics

optimization based bidding strategies in the deregulated market with the deregulation of electric power systems market participants are facing an important task of bidding energy to an independent system operator iso this paper presents a model and a method for optimization based bidding and self scheduling where a utility bids part of its energy and self schedules the rest as in new england the model considers iso bid selections and uncertain bidding information of other market participants with appropriately simplified bidding and iso models closed form iso solutions are first obtained these solutions are then plugged into the utility s bidding and self scheduling model which is solved by using lagrangian relaxation testing results show that the method effectively solves the problem with reasonable amount of cpu time

real time pricing with ramping costs a new approach to managing a steep change in electricity demand in many countries electricity demand increases very steeply during the morning hours and decreases steeply during the evening hours a steep change in electricity demand incurs considerable costs for ramping up and down electric power equipment and raises the possibility of a large scale blackout this paper gives new insights into classical real time pricing rtp by considering the case in which demand changes very steeply we generalize the concept of the ramping costs and derive an extended form of rtp that achieves the optimal rate of change in quantity demanded by explicitly taking the ramping costs into account under the optimal pricing policy the prices are dramatically reduced during the period corresponding to the lower end of the slope of the load curve in contrast the prices are dramatically raised during the period corresponding to the upper end of the slope of the load curve as a result the steepness of the load curve will be remarkably controlled which will reduce both the ramping costs and the possibility of a large scale blackout

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

nonlinear equilibrium correction in u s real money balances 1869 1997 several theoretical models of money demand imply nonlinear functional forms for the aggregate demand for money characterized by smooth adjustment toward long run equilibrium in this paper we propose a nonlinear equilibrium correction model of u s money demand that is shown to be stable over the sample period from 1869 to 1997

non linear error correction and the uk demand for broad money 1878 1993 in this paper we reconsider an error correction model of uk broad money demand by ericsson hendry and prestwich their model is non linear in both variables and parameters and it can be viewed as an approximation to a smooth transition regression str type specification the corresponding str model when specified and estimated fits the data better than the original model adopting a somewhat more general modelling approach leads to another str model this model variance dominates the other two and the encompassing tests performed in this paper indicate that it is an improvement over the other two specifications copyright 2001 john wiley sons ltd

generation scheduling in a deregulated system the norwegian case the paper gives an overview of the deregulated electricity supply system in norway with emphasis on the generation scheduling approach procedures and tools for long medium and short term scheduling are described scheduling is carried out by each individual utility since scheduling is based on profit maximizing the spot market price is a very important factor this price is varying and uncertain however a part of the paper describes how to deal with this by considering the spot market price as an exogenously given stochastic variable it is shown how to extend the common water value computations so as to handle this case implications to the medium and short term scheduling are also discussed

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

in old chicago simons friedman and the development of monetary policy rules this paper examines the different policy rules proposed by henry simons who beginning in the mid 1930s advocated a price level stabilization rule and by milton friedman who beginning in the late 1950s advocated a rule that targeted a constant growth rate of the money supply although both rules shared the objective of eliminating the policy uncertainty emanating from discretion they differed because of the different views of simons and friedman about the stability of secular relationships simons rule relates to modern rules that emphasize the pursuit of price stability as representing optimal monetary policy

currency substitution and nonlinear error correction in taiwan s demand for broad money we modify the conventional money demand function by including a real exchange rate variable to reflect the effect of currency substitution empirical evidence indicates that the variable is crucial to the long run stability of taiwan s money demand after finding the failure of a linear error correction model ecm in describing the dynamics of taiwan s money demand we apply a nonlinear ecm to examine its dynamics and support the appropriateness of the nonlinear model empirically

the econometrics of the holy grail a review of econometrics alchemy or science essays in econometric methodology books reviewed in this article david f hendry 1993 econometrics alchemy or science essays in econometric methodology

smooth adjustment econometrics and inventory theoretic money management abstract a growing number of empirical papers use miller orr s s money management as economic motivation for application of non linear smooth adjustment models this paper shows such models are not implied by the miller orr economy instead the miller orr economy implies non standard smooth adjustment as derived in the neglected and misinterpreted work of milbourne et al 1983 remarkably this function includes a varying weight on the lagged dependent variable capturing static not dynamic effects interpretations of these apparent dynamics are presented some of which may be useful in non monetary s s contexts results imply a new agenda for applied smooth adjustment modeling of money

institutional hypothesis of the long run income velocity of money and parameter stability of the equilibrium relationship it has recently been argued that when the conventional specification of m2 income velocity is extended to include proxies for two types of institutional change as emphasized by bordo and jonung 1987 1990 corresponding to the processes of monetization and increasing financial sophistication of financial developments this extended model is stable in the sense that one can reject the null hypothesis of no cointegration against the alternative of a single cointegrating vector there may be implications that such an equilibrium relation is a structural income velocity of money function the evidence based on century long data from 1880 to 1986 presented in this paper about parameter instability of the cointegrating vector of velocity with its determinants for canada norway sweden and the united kingdom casts doubt on this interpretation the evidence is based on using formal stability tests moreover it has an eyeball support from the sequential estimates of various parameters of the cointegrating relationship including income and interest semi elasticities

testing for the cointegrating rank of a var process with structural shifts tests for the cointegrating rank of a vector autoregressive process are considered that allow for possible exogenous shifts in the mean of the data generation process the break points are assumed to be known a priori it is proposed to estimate and remove the deterministic terms such as mean linear trend term and a shift in a first step then systems cointegration tests are applied to the adjusted series the resulting tests are shown to have known limiting null distributions that are free of nuisance parameters and do not depend on the break point the tests are applied for analyzing the number of cointegrating relations in two german money demand systems

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

exchange rate sensitivity of demand for money and effectiveness of fiscal and monetary policies one of the arguments between proponents and opponents of floating exchange rates centres around the relative effectiveness of fiscal and monetary policy while proponents of floating rates argue that monetary policy is more effective under floating rates its opponents contend that fiscal policy is more effective under fixed rates however economic theory suggests that there is room for both policies under both types of exchange rate system depending upon degree of sterlization concentrating on the floating rates mundell 1963 has argued that the relative effectiveness of monetary and fiscal policies would also depend upon sensitivity of money demand to exchange rate more precisely he has conjectured that the demand for money is likely to depend upon the exchange rate in addition to the interest rate and the level of income this would slightly reduce the effectiveness of a given change in the quantity of money and slightly increase the effectiveness of fiscal policy on income and employment under

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

m3 money demand and excess liquidity in the euro area recent empirical studies have found evidence of unstable long run money demand functions if recent data are used if the link between money balances and the macroeconomy is fragile the rationale of monetary aggregates in the ecb strategy has to be doubted in contrast we present a stable long run money demand relationship for m3 for the period 1983 2006 to obtain the result the short run homogeneity restriction between money and prices is relaxed and a break in the income elasticity of money demand after 2001 is taken into account measures of excess liquidity do not show significant inflation pressures

alternative approaches to analyzing economic data this paper compares two approaches to the analysis of economic data the exclusively econometric approach recommended by hendry and ericsson and the more eclectic approach that we employed in our books monetary history and monetary trends it concludes that the article by hendry and ericsson is mislabeled their article is not in any relevant sense an evaluation of our empirical model of u k money demand rather it uses one equation from our book as a peg on which to hang an exposition of sophisticated econometric techniques insofar as their empirical findings do bear on ours they simply confirm some of our principal results and contradict none jel 036 212

a spatial panel data approach to estimating u s state level energy emissions we take advantage of a long panel data set to estimate the relationship between u s state level carbon dioxide co2 emissions economic activity and other factors we specify a reduced form energy demand model to account for energy consumption activities that drive energy related emissions we contribute to the literature by exploring several spatial panel data models to account for spatial dependence between states estimation results and rigorous diagnostic analysis suggest that 1 economic distance plays a role in intra and inter state co2 emissions and 2 there are statistically significant positive economic spillovers and negative price spillovers to state level emissions

money is what money does monetary aggregation and the equation of exchange this paper develops a method for distilling the transactions role of the array of monetary assets available to the public into a single aggregate measure of effective transactions balances the result is a monetary quantity index number designated mq which corresponds closely with the monetary aggregate contemplated in the equation of exchange mv pq in general mq and the conventional aggregate m 1 exhibit strikingly similar behavior however during episodes when the behavior of m1 is abnormal relative to income and interest rates mq behaves differently from m 1 during these periods anomalies in the behavior of mq are not detectable

gospel or disaster an empirical study on the environmental influences of domestic investment in china abstract since the beginning of china s reform and opening up in late 1970s the contradiction between environmental quality and economic development has become increasingly acute as the main driving force of development china s fixed asset investment fai has grown rapidly in the meanwhile china s energy consumption surged and the environmental pressures mounted the surge in fai may have great influences on the environmental quality on the one hand the rapid increase in fai facilitated the development of the secondary industry especially energy and pollution intensive industries which brought about significant amount of energy related pollution on the other hand growing investment on environmental investment is expected to slow environmental deterioration moreover the environmental quality and domestic investment may have potential spatial correlations in this paper after fully accounting for the spatial dependence the relationship between domestic investment and environmental quality in china is quantitatively investigated using co2 and so2 as two representative pollutants the estimation results indicate that the spatial dependence indeed exists and total effects of fai on pollutant emissions are positive however there is no evidence that environmental protection investment had expected effects to effectively curb pollutant emissions in china

the time varying performance of the long run demand for money in the united states george s tavlas this article investigates the issues of the stability and predictability and interestsensitivity of money demand over 1870 1997 two different estimation methodologies are used random coefficient rc modeling and vector error correction vec modeling the former procedure allows the profiles of the coefficients to be traced over time and relaxes several restrictions routinely imposed in applied work the results indicate that different estimation methodologies using different data periods and frequencies yield estimates of some of the coefficients of the long run demand for money that fall within a fairly narrow range the results also suggest that specification errors have had an important influence on the time profile of the interest elasticity of money demand and that there is a tendency for the interest elasticity to decline in absolute value as interest rates decline jel c20 e47 i introduction this article reinvestigates the issues of the stability predictability and interestsensitivity of the long run demand for money in the united states 1 the model used is closely based on that used by friedman and schwartz 1982 the data are also those of friedman and schwartz extended by bordo et al 1997 and us to include more recent observations while the data frequency is annual rather than averaged over business cycle phases as used by friedman and schwartz 2 two very different methodologies are used to examine the issue of money demand behavior vector error correction vec modeling and random coefficient rc modeling the former approach is aimed at addressing problems of spurious correlation produced by integrated variables and dynamic misspecification due to inadequate lag structures and attempts to integrate short run dynamics with departures from long run equilibrium relationships the underlying philosophy of this approach is the general to specific methodology popularized by hend ry and his associates e g hendry and ericsson 1991 ericsson et al 1998 the rc approach developed by swamy and tinsley 1980 swamy and tavlas 1992 1995 2000 and christou et al 1996 1998 is aimed at dealing with four major specification problems discussed in section ii that often arise in econometric estimation we use it to shed light on such issues as the stability and predictability of money demand and whether the demand for money was more interest sensitive during the 1930s great depression than in other periods and indeed whether a liquidity trap existed in the 1930s the remainder of this article is divided into three sections section ii discusses the basic money demand specification the data and the vec and rc estimation procedures section iii presents the estimation results both the vec and rc models are estimated using annual data covering 1870 1989 and postsample forecasts are generated over 1990 1997 the models are then reestimated over earlier periods to test how well they forecast in a variety of circumstances including the great depression years for as goldfeld 1992 623 put it in his survey of the money demand literature ultimately of course such models need to stand the forward test of time that is they need to continue to hold outside the period of estimation 3 an aim of the article is to inquire whether two different empirical methodologies can provide a stable long run demand for money function that can perform well in prediction if so this should provide some reassurance about the empirical properties of that function section iv concl udes ii the model data and estimation procedures a basic friedman schwartz specification friedman and schwartz 1982 posited the following money demand function 1 ln m sub t alpha sub 0 alpha sub 1 r sub t alpha sub 2 ln y sub t alpha sub 3 g sub yt u sub t where m

i discovered the peso problem irving fisher and the uip puzzle abstract irving fisher was the first economist to posit what has come to be known as uncovered interest parity relation he was also the first to offer a peso problem type explanation for important episodes in which it was violated after reviewing his theoretical and empirical work on this subject we go on to reexamine both his data and several other bodies two consisting of multi country panel data and a third consisting of a two century long time series for the united states and the united kingdom we find evidence in these data of the important role played by episodic phenomena in disturbing the uip relation like fisher we find that the influence of such phenomena dissipates over time over the long term these errors prove to be less important and uip receives empirical support