The Demand for M1 in the United States: A Comment on Baba, Hendry, and Starr
10 Pages Posted: 15 Feb 2006
Date Written: March 1993
Abstract
A recent paper by Baba, Hendry, and Starr presents an error-correction model of the demand for M1 in the United States, which shows a dramatic improvement in both fit and stability over earlier models. This note estimates an alternative model with the same data set and draws two conclusions: that the improvements are due more to the use of complex dynamics than to the introduction of variables representing financial innovation, and that some of the economic properties are not robust with respect to minor changes in specification.
JEL Classification: E41
Suggested Citation: Suggested Citation
Boughton, James, The Demand for M1 in the United States: A Comment on Baba, Hendry, and Starr (March 1993). IMF Working Paper No. 93/24, Available at SSRN: https://ssrn.com/abstract=883456
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