Money demand in Japan and nonlinear cointegration

Youngsoo Bae, Vikas Kakkar, Masao Ogaki

Research output: Contribution to journalArticle

15 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

Fingerprint

Functional form
Japan
Money demand
Nonlinear cointegration
Cointegration
Liquidity trap
Nominal interest rate
Demand function
Out-of-sample forecasting

Keywords

  • Liquidity trap
  • Money demand
  • Nonlinear cointegration

ASJC Scopus subject areas

  • Finance
  • Accounting
  • Economics and Econometrics

Cite this

Money demand in Japan and nonlinear cointegration. / Bae, Youngsoo; Kakkar, Vikas; Ogaki, Masao.

In: Journal of Money, Credit and Banking, Vol. 38, No. 6, 09.2006, p. 1659-1667.

Research output: Contribution to journalArticle

Bae, Youngsoo ; Kakkar, Vikas ; Ogaki, Masao. / Money demand in Japan and nonlinear cointegration. In: Journal of Money, Credit and Banking. 2006 ; Vol. 38, No. 6. pp. 1659-1667.
@article{dcaceb62007442bb8973f7204bbee62e,
title = "Money demand in Japan and nonlinear cointegration",
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.",
keywords = "Liquidity trap, Money demand, Nonlinear cointegration",
author = "Youngsoo Bae and Vikas Kakkar and Masao Ogaki",
year = "2006",
month = "9",
doi = "10.1353/mcb.2006.0076",
language = "English",
volume = "38",
pages = "1659--1667",
journal = "Journal of Money, Credit and Banking",
issn = "0022-2879",
publisher = "Wiley-Blackwell",
number = "6",

}

TY - JOUR

T1 - Money demand in Japan and nonlinear cointegration

AU - Bae, Youngsoo

AU - Kakkar, Vikas

AU - Ogaki, Masao

PY - 2006/9

Y1 - 2006/9

N2 - 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.

AB - 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.

KW - Liquidity trap

KW - Money demand

KW - Nonlinear cointegration

UR - http://www.scopus.com/inward/record.url?scp=33748571943&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=33748571943&partnerID=8YFLogxK

U2 - 10.1353/mcb.2006.0076

DO - 10.1353/mcb.2006.0076

M3 - Article

VL - 38

SP - 1659

EP - 1667

JO - Journal of Money, Credit and Banking

JF - Journal of Money, Credit and Banking

SN - 0022-2879

IS - 6

ER -