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Title: |
Money Demand and Seasonal Cointegration |
| Author: |
Shen, Chung-Hua; Huang, Tai-Hsin |
| Author
Affiliation: |
National
Chengchi U; Tamkang U |
| Source: |
International Economic Journal, Autumn 1999, v. 13, no. 3, pp. 97-123 |
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Publication Date: |
Autumn 1999 |
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Abstract: |
This paper employs a seasonal error
correction model (SECM) to examine the stability of Taiwan's narrow and
broad money demand functions. With the exception of the short term
interest rate, these two monetary aggregates and their determinants are
found to have strong seasonal unit roots at various frequencies. The
demand functions for both narrow and broad money are cointegrated with
real GNP and exports at the annual frequency, whereas the demand for
broad money is cointegrated with real GNP at the biannual frequency.
Furthermore, both money aggregates are cointegrated with real GNP,
exports and the interest rate at the zero frequency. A SECM is then
constructed for the respective narrow and broad money demand functions,
of which the latter is found to be stable. |
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