Investigating Stability and Linearity of a German M1 Money Demand Function

WPS64-8/95

Posted: 22 Apr 1998

See all articles by Helmut Luetkepohl

Helmut Luetkepohl

European University Institute; CESifo (Center for Economic Studies and Ifo Institute)

Timo Teräsvirta

Stockholm School of Economics - Department of Economics

Jürgen Wolters

Free University of Berlin (FUB)

Date Written: Undated

Abstract

Starting from a linear error correction model the stability and linearity of a German M1 money demand function are investigated, applying smooth transition regression techniques. Using seasonally unadjusted data from 1961 (1) to 1990 (2) it is found that the money demand equation is both linear and stable. After extending the sampling period until 1994 (2) a clear structural instability due to the monetary unification 1 July 1990 is found and subsequently modelled.

JEL Classification: C22, C52, E41

Suggested Citation

Luetkepohl, Helmut and Teräsvirta, Timo and Wolters, Jürgen, Investigating Stability and Linearity of a German M1 Money Demand Function (Undated). WPS64-8/95, Available at SSRN: https://ssrn.com/abstract=3264

Helmut Luetkepohl

European University Institute ( email )

Villa San Paulo
Via della Piazzola 43
I-50133 Firenze
Italy
+39 055 4685 971 (Phone)
+39 055 4685 902 (Fax)

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Timo Teräsvirta (Contact Author)

Stockholm School of Economics - Department of Economics ( email )

P.O. Box 6501
Sveavagen 65
S-113 83 Stockholm
Sweden

Jürgen Wolters

Free University of Berlin (FUB) ( email )

Van't-Hoff-Str. 8
D-10785 Berlin, Berlin 14195
Germany
+49-30-838-2014 (Phone)
+49-30-838-4142 (Fax)

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