Serletis The Demand for Money

Theoretical and Empirical Approaches
2. Auflage 2007
ISBN: 978-0-387-71727-2
Verlag: Springer-Verlag
Format: PDF
Kopierschutz: Adobe DRM (»Systemvoraussetzungen)

E-Book, Englisch, 382 Seiten

Almost half a century has elapsed since the demand for money began to attract widespread attention from economists and econometricians, and it has been a topic of ongoing controversy and research ever since. Interest in the topic stemmed from three principal sources. Firstofall,therewasthematter oftheinternaldynamicsofmacr- conomics, to which Harry Johnson drew attention in his 1971 Ely Lecture on “The Keynesian Revolution and the Monetarist Counter- Revolution,” American Economic Review 61 (May 1971). The main lesson about money that had been drawn from the so-called “Key- sian Revolution” was — rightly or wrongly — that it didn’t matter all that much. The inherited wisdom that undergraduates absorbed in the 1950s was that macroeconomics was above all about the determination of income and employment, that the critical factors here were saving and investment decisions, and that monetary factors, to the extent that they mattered at all, only had an in?uence on these all important variables through a rather narrow range of market interest rates. C- ventional wisdom never goes unchallenged in economics, except where its creators manage to control access to graduate schools and the jo- nals,anditiswithnocynicalintentthatIcon?rmJohnson’ssuggestion that those of us who embarked on academic careers in the ’60s found in this wisdom a ready-made target.

Autoren/Hrsg.

Serletis, Apostolos

Inhaltsverzeichnis

1;Contents;6
2;Acknowledgments;13
3;Foreword;14
4;Introduction;17
5;Part 1: Static Monetary Macroeconomics;21
5.1;1 Classical Macroeconomic Theory;22
5.1.1;1.1 The Complete Classical Model;23
5.1.2;1.2 The Classical Dichotomy;26
5.1.3;1.3 The Classical AD-AS Model;27
5.1.4;1.4 The Neutrality of Money;29
5.1.5;1.5 Conclusion;30
5.2;2 Keynesian Macroeconomic Theory;31
5.2.1;2.1 The Keynesian Consumption Function;32
5.2.2;2.2 The Complete Keynesian Model;32
5.2.3;2.3 The Keynesian-Cross Model;34
5.2.4;2.4 The IS-LM Model;35
5.2.5;2.5 The Keynesian AD-AS Model;39
5.2.6;2.6 Conclusion;41
6;Part 2: Dynamic Monetary Macroeconomics;43
6.1;3 Models with Rational Expectations;45
6.1.1;3.1 The Cagan Model;46
6.1.2;3.2 Adaptive Expectations;47
6.1.3;3.3 Rational Expectations;48
6.1.4;3.4 The Lucas Critique;51
6.1.5;3.5 Rules versus Discretion;56
6.1.6;3.6 Time Inconsistency;58
6.1.7;3.7 Inflation Mitigation;60
6.1.8;3.8 Conclusion;60
6.2;4 Neoclassical Growth Theory;62
6.2.1;4.1 The Solow Model;62
6.2.2;4.2 The Optimal Growth Model;67
6.2.3;4.3 The Overlapping Generations Model;72
6.2.4;4.4 Conclusion;77
6.3;5 Monetary Growth Theory;79
6.3.1;5.1 The Tobin Model;80
6.3.2;5.2 The Sidrauski Model;84
6.3.3;5.3 A Variation of the Sidrauski Model;86
6.3.4;5.4 The New Empirics of Monetary Growth;88
6.3.5;5.5 Conclusion;89
6.4;6 The Welfare Cost of Inflation;91
6.4.1;6.1 The Money Demand Function;91
6.4.2;6.2 The Consumer Surplus Approach;92
6.4.3;6.3 The Compensating Variation Approach;94
6.4.4;6.4 Empirical Evidence;98
6.4.5;6.5 Conclusion;100
7;Part 3: Theoretical Approaches to the Demand for Money;102
7.1;7 The Classics, Keynes, and Friedman;103
7.1.1;7.1 The Equation of Exchange;104
7.1.2;7.2 The Quantity Theory of Money;104
7.1.3;7.3 The Quantity Theory Demand for Money;105
7.1.4;7.4 The Cambridge Cash Balance Equation;106
7.1.5;7.5 The Keynesian Approach;107
7.1.6;7.6 Friedman’s Modern Quantity Theory;110
7.1.7;7.7 Conclusion;113
7.2;8 Transactions Theories of Money Demand;115
7.2.1;8.1 The Baumol-Tobin Model;115
7.2.2;8.2 The Shopping-Time Model;118
7.2.3;8.3 Cash-in-Advance Models;121
7.2.4;8.4 Conclusion;125
7.3;9 Portfolio Theories of Money Demand;127
7.3.1;9.1 Tobin’s Theory of Liquidity Preference;127
7.3.2;9.2 Money and Overlapping Generations;130
7.3.3;9.3 Conclusion;134
8;Part 4: Empirical Approaches to the Demand for Money;136
8.1;10 Conventional Demand for Money Functions;138
8.1.1;10.1 The Basic Specification;139
8.1.2;10.2 The Long-Run Function;144
8.1.3;10.3 Money Demand Dynamics;147
8.1.4;10.4 First-Difference Specifications;149
8.1.5;10.5 Conclusion;151
8.2;11 Modeling Trends in the Variables of the Money Demand Function;152
8.2.1;11.1 Deterministic and Stochastic Trends;153
8.2.2;11.2 Testing for Unit Roots;155
8.2.3;11.3 Testing for Stationarity;159
8.2.4;11.4 Fractional Integration;160
8.2.5;11.5 Testing for Nonlinearity and Chaos;161
8.2.6;11.6 Detecting Signatures of Self-Organization;167
8.2.7;11.7 Conclusion;169
8.3;12 Cointegration and the Aggregate Demand for Money Function;170
8.3.1;12.1 Cointegration;171
8.3.2;12.2 Cointegration and Common Trends;171
8.3.3;12.3 Cointegration and Common Cycles;173
8.3.4;12.4 Cointegration and Codependent Cycles;174
8.3.5;12.5 Cointegration and Error Correction;175
8.3.6;12.6 Cointegration and Money Demand;176
8.3.7;12.7 Testing for Cointegration;178
8.3.8;12.8 A Bounds Testing Approach;183
8.3.9;12.9 Conclusion;186
8.4;13 Balanced Growth, the Demand for Money, and Monetary Aggregation;187
8.4.1;13.1 Theoretical Background;188
8.4.2;13.2 Univariate Tests for Unit Roots;189
8.4.3;13.3 Testing the c, i, y System;190
8.4.4;13.4 Testing the m - p, y, R System;192
8.4.5;13.5 Testing the c, i, m- p, y, R System;193
8.4.6;13.6 Conclusion;193
8.5;14 Cross-Country Evidence on the Demand for Money;197
8.5.1;14.1 Cross-Country Data;198
8.5.2;14.2 Cross-Country Specifications;198
8.5.3;14.3 Cross-Country Evidence;202
8.5.4;14.4 Robustness;207
8.5.5;14.5 Conclusion;208
9;Part 5: Microfoundations and Monetary Aggregation;209
9.1;15 The Microeconomic Foundations of the Definition of Money;210
9.1.1;15.1 The Simple-Sum Index;211
9.1.2;15.2 The User Cost of Money;212
9.1.3;15.3 Microeconomic Foundations;214
9.1.4;15.4 Aggregation Theory;216
9.1.5;15.5 Index Number Theory;218
9.1.6;15.6 Diewert’s Link;220
9.1.7;15.7 Conclusion;222
9.2;16 The New Monetary Aggregates;223
9.2.1;16.1 The Neoclassical Monetary Problem;224
9.2.2;16.2 Understanding the Divisia Aggregates;225
9.2.3;16.3 Divisia Second Moments;227
9.2.4;16.4 Measurement Matters;228
9.2.5;16.5 The MQ and CE Indexes;229
9.2.6;16.6 Empirical Comparisons;231
9.2.7;16.7 Conclusion;240
9.3;17 Nominal Stylized Facts;241
9.3.1;17.1 The Hodrick and Prescott Filter;242
9.3.2;17.2 The Cyclical Behavior of Money;243
9.3.3;17.3 Prices, Interest Rates, and Velocity;246
9.3.4;17.4 Robustness;250
9.3.5;17.5 Conclusion;252
10;Part 6: Microfoundations and the Demand for Money;253
10.1;18 The Nonparametric Approach to Demand Analysis;254
10.1.1;18.1 The Idea of Revealed Preference;255
10.1.2;18.2 The Maximization Hypothesis;256
10.1.3;18.3 Homotheticity;256
10.1.4;18.4 Direct Separability;257
10.1.5;18.5 Indirect Separability;260
10.1.6;18.6 Homothetic Separability;262
10.1.7;18.7 NONPAR Tests of Consumer Behavior;263
10.1.8;18.8 Conclusion;264
10.2;19 The Parametric Approach to the Demand for Monetary Assets;266
10.2.1;19.1 The Direct Utility Approach;266
10.2.2;19.2 The Indirect Utility Approach;268
10.2.3;19.3 The Slutsky Conditions;271
10.2.4;19.4 Conclusion;277
10.3;20 Locally Flexible Functional Forms and Demand Systems;278
10.3.1;20.1 Locally Flexible Forms;279
10.3.2;20.2 Effectively Globally Regular Forms;282
10.3.3;20.3 Imposing Local Curvature;285
10.3.4;20.4 Conclusion;291
10.4;21 Globally Flexible Functional Forms and Demand Systems;293
10.4.1;21.1 The Fourier Model;294
10.4.2;21.2 The AIM Model;296
10.4.3;21.3 Computational Considerations;302
10.4.4;21.4 Imposing Curvature Restrictions;303
10.4.5;21.5 Conclusion;305
11;Part 7: Microeconometrics and the Demand for Money;306
11.1;22 The Econometrics of Demand Systems;307
11.1.1;22.1 Dimension Reduction;308
11.1.2;22.2 Duality and Functional Structure;310
11.1.3;22.3 Stochastic Specification;311
11.1.4;22.4 Autoregressive Disturbances;313
11.1.5;22.5 Theoretical Regularity;315
11.1.6;22.6 Econometric Regularity;316
11.1.7;22.7 Expenditure and Price Elasticities;317
11.1.8;22.8 Elasticities of Substitution;317
11.1.9;22.9 Conclusion;319
11.2;23 Applied Monetary Demand Analysis;320
11.2.1;23.1 The Monetary Problem;321
11.2.2;23.2 The Basic Translog and the Demand for Money;322
11.2.3;23.3 The AIM(2) Model and the Demand for Money;327
11.2.4;23.4 Conclusion;334
11.3;24 Future Research Agenda;335
11.3.1;24.1 Outstanding Credit;336
11.3.2;24.2 Monetary Policy;336
11.3.3;24.3 Dynamics;336
11.3.4;24.4 Risk Matters;339
11.3.5;24.5 Conclusion;344
12;References;345
13;Author Index;370
14;Subject Index;374