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Financial Deregulation and the Stability of the Demand for Money in Australia

  1. Journals
  2. Economics, Finance, Business & Management
  3. Credit and Capital Markets – Kredit und Kapital
  4. Vol. 24, Issue 3
  5. pp. 319–331

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de Haan, J., Zelhorst, D. Financial Deregulation and the Stability of the Demand for Money in Australia. Credit and Capital Markets – Kredit und Kapital, 24(3), 319-331. https://doi.org/10.3790/ccm.24.3.319
de Haan, Jakob and Zelhorst, Dick "Financial Deregulation and the Stability of the Demand for Money in Australia" Credit and Capital Markets – Kredit und Kapital 24.3, 1991, 319-331. https://doi.org/10.3790/ccm.24.3.319
de Haan, Jakob/Zelhorst, Dick (1991): Financial Deregulation and the Stability of the Demand for Money in Australia, in: Credit and Capital Markets – Kredit und Kapital, vol. 24, iss. 3, 319-331, [online] https://doi.org/10.3790/ccm.24.3.319
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Financial Deregulation and the Stability of the Demand for Money in Australia

de Haan, Jakob | Zelhorst, Dick

Credit and Capital Markets – Kredit und Kapital, Vol. 24 (1991), Iss. 3 : pp. 319–331

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Article Details

Publisher Name
Duncker & Humblot
DOI
https://doi.org/10.3790/ccm.24.3.319
Language
Multiple languages
Pages
13

Author Details

Jakob de Haan, Groningen/Netherlands

Dick Zelhorst, Groningen/Netherlands

References

  1. Cesar, H.; de Haan, J.; Jacobs, J. (1990): “Monetary Targeting in the Netherlands”, Applied Economics, 22, 1537 - 1548.  Google Scholar
  2. Corden, W.M. (1989): “Australian Macroeconomic Policy Experience”, The Economic Record, 65, 152 - 164.  Google Scholar
  3. Dickey, D.A.; Fuller, W.A. (1981): “Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root”, Econometrica, 49, 1057 - 1072.  Google Scholar
  4. Engle, R.F.; Granger, C.W.J. (1987): “Cointegration and Error Correction: Representation, Estimation and Testing”, Econometrica, 55, 251 - 276.  Google Scholar
  5. Friedman, B.M. (1988): “Monetary Policy Without Quantity Variables”, American Economic Review (papers), 78, 440 - 445.  Google Scholar
  6. Fuller, W.A. (1976): Introduction to Statistical Time Series, New York: John Wiley & Sons.  Google Scholar
  7. Goodhart, C.A. (1989): “The Conduct of Monetary Policy”, The Economic Journal, 99, 293 - 346.  Google Scholar
  8. Granger, C.W.J. (1986): “Developments in the Study of Cointegrated Economic Variables”, Oxford Bulletin of Economics and Statistics, 48, 213 - 228.  Google Scholar
  9. Hall, M.J.B. (1985): “Financial Deregulation and Monetary Policy in Australia”, Banca Nazionale del Lavoro Quarterly Review, no. 154, 261 - 277.  Google Scholar
  10. Hoa, T.V. (1982): “Extended Power Modulus Transformations of the Demand-for-Money Functions for West Germany and Australia: An International Comparison”, Weltwirtschaftliches Archiv, 118, 563 - 570.  Google Scholar
  11. Hunt, B.F.; Volker, P.A. (1981): “A Simplified Portfolio Analysis of the Long-Run Demand for Money in Australia”, Journal of Monetar Economics, 8, 395 - 404.  Google Scholar
  12. Judd, J.P.; Scadding, J.L. (1982): “The Search for a Stable Money Demand Function: A Survey of the Post-1973 Literature”, Journal of Economic Literature, 20, 993 - 1023.  Google Scholar
  13. Jüttner, D.J.;, Tuckwell, R.H. (1974): “Partial Adjustment, Multiple Expectations and the Demand for Money in Australia”, Kredit und Kapital, 7, 48 - 68.  Google Scholar
  14. Kannjainen, V., Tarkka, J. (1986): “On the Shock-Absorptio View of Money: International Evidence from the 1960s and 1970s”, Applied Economics, 18, 1085 - 1101.  Google Scholar
  15. Milbourne, R. (1983): “Price Expectations and the Demand for Money: Resolution of a Paradox”, Review of Economics and Statistics, 65, 633 - 638. -  Google Scholar
  16. OECD (1979): Monetary Targets and Inflation Control, Paris.  Google Scholar
  17. OECD (1983): OECD Economic Surveys Australia, Paris.  Google Scholar
  18. OECD (1987): OECD Economic Surveys Australia, Paris.  Google Scholar
  19. Pagan, A.R.; Volker, P.A. (1981): “The Short-Run Demand for Transaction Balances in Australia”, Economica, 48, 381 - 395.  Google Scholar
  20. Perron, P. (1988): “Trends and Random Walks in Macroeconomic Times Series. Further Evidence from a New Approach”, Journal of Economic Dynamics and Control, 12, 297 - 332.  Google Scholar
  21. Phillips, P.C.B. (1987): “Time Series Regression With a Unit Root”, Econometrica, 55, 277 - 301.  Google Scholar
  22. Phillips, P.C.B.; Ouliaris, S. (1990): “Asymptotic Properties of Residual Based Tests for Cointegration”, Econometrica, 58, 165 - 193.  Google Scholar
  23. Phillips, P.C.B.; Perron, P. (1988): “Testing for a Unit Root in Time Series Regression”, Biometrika, 75, 335 -346.  Google Scholar
  24. Polasek, M.; Lewis, M.K. (1985): “Australia’s Transition from Crawling Peg to Floating Exchange Rate”, Banca Nazionale del Lavoro Quarterly Review, no. 153, 187 -203.  Google Scholar
  25. Sargan, J.D. (1964): “Wages and Prices in the United Kingdom: A Study in Econometric Methodology”, first published in Hart, P.E.; Mills, G. and Whitaker, J.K. (eds.): Econometric Analysis for National Economic Planning, 25 - 54, London: Butterworth.  Google Scholar
  26. Sharpe, 1.G.; Volker, P.A. (1979): “The Impact of Institutional Changes on the Australian Short-Run Money Demand Function”, Kredit und Kapital, 12, 101 - 120.  Google Scholar
  27. Swamy, P.A.V.B.; Tavlas, G.S. (1989): “Financial Deregulation, the Demand for Money, and Monetary Policy in Australia”, IMF Staff Papers, 31, 63 -101.  Google Scholar
  28. Trehan, B. (1988): “The Practice of Monetary Targeting: A Case Study of the West German Experience”, Federal Reserve Bank of San Francisco Economic Review, Spring, 30 - 44.  Google Scholar
  29. Cesar, H.; de Haan, J.; Jacobs, J. (1990): “Monetary Targeting in the Netherlands”, Applied Economics, 22, 1537 – 1548.  Google Scholar
  30. Corden, W.M. (1989): “Australian Macroeconomic Policy Experience”, The Economic Record, 65, 152 – 164.  Google Scholar
  31. Dickey, D.A.; Fuller, W.A. (1981): “Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root”, Econometrica, 49, 1057 – 1072.  Google Scholar
  32. Engle, R.F.; Granger, C.W.J. (1987): “Cointegration and Error Correction: Representation, Estimation and Testing”, Econometrica, 55, 251 – 276.  Google Scholar
  33. Friedman, B.M. (1988): “Monetary Policy Without Quantity Variables”, American Economic Review (papers), 78, 440 – 445.  Google Scholar
  34. Fuller, W.A. (1976): Introduction to Statistical Time Series, New York: John Wiley & Sons.  Google Scholar
  35. Goodhart, C.A. (1989): “The Conduct of Monetary Policy”, The Economic Journal, 99, 293 – 346.  Google Scholar
  36. Granger, C.W.J. (1986): “Developments in the Study of Cointegrated Economic Variables”, Oxford Bulletin of Economics and Statistics, 48, 213 – 228.  Google Scholar
  37. Hall, M.J.B. (1985): “Financial Deregulation and Monetary Policy in Australia”, Banca Nazionale del Lavoro Quarterly Review, no. 154, 261 – 277.  Google Scholar
  38. Hoa, T.V. (1982): “Extended Power Modulus Transformations of the Demand-for-Money Functions for West Germany and Australia: An International Comparison”, Weltwirtschaftliches Archiv, 118, 563 – 570.  Google Scholar
  39. Hunt, B.F.; Volker, P.A. (1981): “A Simplified Portfolio Analysis of the Long-Run Demand for Money in Australia”, Journal of Monetar Economics, 8, 395 – 404.  Google Scholar
  40. Judd, J.P.; Scadding, J.L. (1982): “The Search for a Stable Money Demand Function: A Survey of the Post-1973 Literature”, Journal of Economic Literature, 20, 993 – 1023.  Google Scholar
  41. Jüttner, D.J.;, Tuckwell, R.H. (1974): “Partial Adjustment, Multiple Expectations and the Demand for Money in Australia”, Kredit und Kapital, 7, 48 – 68.  Google Scholar
  42. Kannjainen, V., Tarkka, J. (1986): “On the Shock-Absorptio View of Money: International Evidence from the 1960s and 1970s”, Applied Economics, 18, 1085 – 1101.  Google Scholar
  43. Milbourne, R. (1983): “Price Expectations and the Demand for Money: Resolution of a Paradox”, Review of Economics and Statistics, 65, 633 – 638. -  Google Scholar
  44. OECD (1979): Monetary Targets and Inflation Control, Paris.  Google Scholar
  45. OECD (1983): OECD Economic Surveys Australia, Paris.  Google Scholar
  46. OECD (1987): OECD Economic Surveys Australia, Paris.  Google Scholar
  47. Pagan, A.R.; Volker, P.A. (1981): “The Short-Run Demand for Transaction Balances in Australia”, Economica, 48, 381 – 395.  Google Scholar
  48. Perron, P. (1988): “Trends and Random Walks in Macroeconomic Times Series. Further Evidence from a New Approach”, Journal of Economic Dynamics and Control, 12, 297 – 332.  Google Scholar
  49. Phillips, P.C.B. (1987): “Time Series Regression With a Unit Root”, Econometrica, 55, 277 – 301.  Google Scholar
  50. Phillips, P.C.B.; Ouliaris, S. (1990): “Asymptotic Properties of Residual Based Tests for Cointegration”, Econometrica, 58, 165 – 193.  Google Scholar
  51. Phillips, P.C.B.; Perron, P. (1988): “Testing for a Unit Root in Time Series Regression”, Biometrika, 75, 335 -346.  Google Scholar
  52. Polasek, M.; Lewis, M.K. (1985): “Australia’s Transition from Crawling Peg to Floating Exchange Rate”, Banca Nazionale del Lavoro Quarterly Review, no. 153, 187 -203.  Google Scholar
  53. Sargan, J.D. (1964): “Wages and Prices in the United Kingdom: A Study in Econometric Methodology”, first published in Hart, P.E.; Mills, G. and Whitaker, J.K. (eds.): Econometric Analysis for National Economic Planning, 25 – 54, London: Butterworth.  Google Scholar
  54. Sharpe, 1.G.; Volker, P.A. (1979): “The Impact of Institutional Changes on the Australian Short-Run Money Demand Function”, Kredit und Kapital, 12, 101 – 120.  Google Scholar
  55. Swamy, P.A.V.B.; Tavlas, G.S. (1989): “Financial Deregulation, the Demand for Money, and Monetary Policy in Australia”, IMF Staff Papers, 31, 63 -101.  Google Scholar
  56. Trehan, B. (1988): “The Practice of Monetary Targeting: A Case Study of the West German Experience”, Federal Reserve Bank of San Francisco Economic Review, Spring, 30 – 44.  Google Scholar

Abstract

Financial Deregulation and the Stability of the Demand for Money in Australia

A common feature of most studies on the demand for money is that a long-run equilibrium money demand function is presumed beforehand. Recently, however, there has been a shift from presuming this relationship towards searching for it by testing whether monetary aggregates are cointegrated with key macroeconomic variables like GDP and the interest rate. In this paper we examine for the case of Australia whether Ml and M3 are cointegrated with these macroeconomic variables. It turns out that for the sample period 1960.1 – 1989.2 neither Ml nor M3 is cointegrated with key macroeconomic variables. However, in the period 1960.1 – 1983.4 – i.e. before various deregulation measures took place – there is evidence suggesting that M3 was cointegrated with real GDP and the interest rate.

Table of Contents

Section Title Page Action Price
Jakob de Haan/Dick Zelhorst: Financial Deregulation and the Stability\rof the Demand for Money in Australia 319
I. Introduction 319
II. Cointegration Theory 321
III. Analysing Monetary Aggregates 322
IV. Some Concluding Comments 329
References 329
Zusammenfassung: Finanzderegulierung und Geldnachfragestabilität in Australien 330
Summary: Financial Deregulation and the Stability of the Demand for Money in Australia 331
Résumé: Dérégulation financière et la stabilité de la demande monétaire en Australie 331

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