Empirical Evidence for a Money Demand Function: A Panel Data Analysis of 27 Countries in 1988-98
8 Pages Posted: 20 Aug 2008
Date Written: August 20, 2008
Abstract
The purpose of this paper is to estimate the money demand function of Cagan (1956) using a panel data set covering 27 countries with different economic levels over the period 1988-98. The static fixed effects and the dynamic fixed effects reveal that a money demand equation exists. However, in contrast to the theory proposed by Cagan, estimates of the output elasticity of money demand are in the range from 0.18 to 0.20.
Keywords: Money demand, Inflation, Panel data, Dynamic fixed effects
JEL Classification: C23, C52, E41
Suggested Citation: Suggested Citation
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