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Title: |
Financial Innovations and Demand for United
States M1 and M2 Components |
| Author: |
Choudhry,
Taufiq |
| Author
Affiliation: |
U Southampton |
| Source: |
International Economic Journal, Spring 2002, v. 16, no. 1, pp. 73-93 |
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Publication Date: |
Spring 2002 |
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Abstract: |
This paper investigates the effects of the
Depository Institution Deregulation and Monetary Control Act of 1980 on
the demand function of the United States M1, M2 and their components.
The empirical tests are conducted using monthly data from January 1959
to June 1997 and the Johansen cointegration procedure. Results show that
the stated monetary act of 1980 considerably affected the income and
interest rate demand elasticities of both M1, M2 and their components.
Results show a fall in the M1 interest rate elasticity indicating M1 as
possibly a more effective monetary policy tool after 1980. Results fail
to show a stationary M2 demand function during the 1980s and 1990s after
the 1980 monetary act. The rate of adjustment of the monetary variables
towards the long-run equilibrium is also affected by the 1980 Act. |
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