Money demand in Japan and nonlinear cointegration

Youngsoo Bae, Vikas Kakkar, Masao Ogaki

Research output: Contribution to journalArticle

17 Citations (Scopus)

Abstract

We estimate the long-run Japanese money demand function in a cointegration framework with two nonlinear functional forms that allow for the liquidity trap, and compare the results with the standard log-level functional form. In addition to the conventional linear cointegration techniques, we also use a recently developed procedure for nonlinear cointegration that allows the estimation of alternative functional forms under the same assumption regarding the trend properties of the nominal interest rate. The nonlinear functional forms outperform the log-level functional form based on out-of-sample prediction performance.

Original languageEnglish
Pages (from-to)1659-1667
Number of pages9
JournalJournal of Money, Credit and Banking
Volume38
Issue number6
DOIs
Publication statusPublished - 2006 Sep
Externally publishedYes

Keywords

  • Liquidity trap
  • Money demand
  • Nonlinear cointegration

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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