Empirical Evidence for a Money Demand Function: A Panel Data Analysis of 27 Countries in 1988-98

8 Pages Posted: 20 Aug 2008

See all articles by Alfredo García-Hiernaux

Alfredo García-Hiernaux

Universidad Complutense de Madrid (UCM) - Department of Fundamentals of Economic Analysis II (Quantitative Economics)

Leonel Cerno

affiliation not provided to SSRN

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

García-Hiernaux, Alfredo and Cerno, Leonel, Empirical Evidence for a Money Demand Function: A Panel Data Analysis of 27 Countries in 1988-98 (August 20, 2008). Applied Econometrics and International Development, Vol. 6, No. 1, 2006, Available at SSRN: https://ssrn.com/abstract=1240504

Alfredo García-Hiernaux (Contact Author)

Universidad Complutense de Madrid (UCM) - Department of Fundamentals of Economic Analysis II (Quantitative Economics) ( email )

Campus of Somosaguas
Madrid
Spain

Leonel Cerno

affiliation not provided to SSRN