The Demand for Money: Theoretical and Empirical Approaches by Apostolos Serletis

By Apostolos Serletis

This e-book presents an account of the prevailing literature at the call for for funds. It indicates how the money call for functionality suits into static and dynamic macroeconomic analyses and discusses the matter of the definition (aggregation) of cash. Professor Serletis takes a microeconomic- and aggregation-theoretic method of the call for for funds, offers empirical proof utilizing fresh state of the art econometric technique, and acknowledges the lifestyles of unsolved difficulties and the necessity for extra developments.

New to this Edition

* elevated insurance of theoretical and empirical methods to the call for for funds, together with a brand new bankruptcy on cross-country evidence
* a brand new bankruptcy on cash call for matters and estimation of the welfare expense of inflation utilizing instruments from public finance and utilized microeconomics
* a brand new bankruptcy on rational expectancies macroeconomics and matters akin to the Lucas critique, principles as opposed to discretion, and time inconsistency
* elevated insurance of the univariate and multivariate homes of the cash call for variables, nonlinear chaotic dynamics, and self-organized criticality
* revised assurance of economic asset call for platforms in keeping with in the neighborhood and globally versatile sensible forms
* elevated assurance of the econometrics of call for structures highlighting the problem inherent with attaining either financial and econometric regularity

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Additional resources for The Demand for Money: Theoretical and Empirical Approaches (2nd Edition)

Sample text

If this were not the case it would be possible to improve the forecast by incorporating the available information. 5) where α < 0 and Et pt+1 = Et (pt+1 |It ). Solving for pt we obtain pt = mt − γ − αEt pt+1 − ut . 6), however, is not a solution for pt , because of the expectational variable, Et pt+1 , on the right-hand side. To derive the rational expectation solution for this model’s endogenous variable, pt , we use the ‘minimal set of state variables (MSV)’ solution procedure — see McCallum (1989, Chapter 8) for more details.

24 Chapter 2. Keynesian Macroeconomic Theory In particular, with sticky prices knowledge of the various functions and of the values of their parameters is particularly useful in evaluating the effects of policy actions on the macroeconomy. In the case, for example, of the money demand function, if the interest elasticity of the demand for money balances is high, then fluctuations in the level of income are not likely to be caused by variations in the money supply. If it is low, then exactly the converse is true.

2) where γ = (α0 + α1 log yt + α2 rt ) is a composite constant term and α = α2 < 0. 2) is the central ingredient of the Cagan model. It involves only two variables, mt and pt , since πte is taken as exogenous. , extremely severe inflationary episodes). 2) and provide evidence that during hyperinflations the demand for real balances depends negatively on the expected inflation rate, πte . He examined seven hyperinflations, but because he had no data on the expected inflation rate, πte , he came up with the adaptive expectations hypothesis, to which we now turn.

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