Menu Expand



Kohli, U. Exogenous Money, Monetary (Dis)equilibrium and Expectational Lags. Credit and Capital Markets – Kredit und Kapital, 20(2), 179-199.
Kohli, Ulrich "Exogenous Money, Monetary (Dis)equilibrium and Expectational Lags" Credit and Capital Markets – Kredit und Kapital 20.2, 1987, 179-199.
Kohli, Ulrich (1987): Exogenous Money, Monetary (Dis)equilibrium and Expectational Lags, in: Credit and Capital Markets – Kredit und Kapital, vol. 20, iss. 2, 179-199, [online]


Exogenous Money, Monetary (Dis)equilibrium and Expectational Lags

Kohli, Ulrich

Credit and Capital Markets – Kredit und Kapital, Vol. 20 (1987), Iss. 2 : pp. 179–199

Additional Information

Article Details

Author Details

Ulrich Kohli, Geneva


  1. Andersen, P. S. (1985): “The Stability of Money Demand Functions: An Alternative Approach”, BIS Economic Papers 14 (Bank for International Settlements, Basle).  Google Scholar
  2. Artis, M. J. and Lewis, M. K. (1976): “The Demand for Money in the United Kingdom: 1963 – 1973”, Manchester School 44, 147 – 181.  Google Scholar
  3. Bordo, M. D., Choudhri, E. U. and Schwartz, A. J. (1984): “Money Growth Variability and Money Supply Interdependence under Interest Rate Control: Some Evidence for Canada”, Working Paper No. 1480, National Bureau of Economic Research.  Google Scholar
  4. Chow, G. C. (1966): “On the Long-Run and Short-Run Demand for Money”, Journal of Political Economy 74, 111 – 131.  Google Scholar
  5. Darby, M. R. (1974): “The Permanent Income Theory of Consumption – A Restatement”, Quarterly Journal of Economics 88, 228 – 250.  Google Scholar
  6. Duguay, P. (1983): “Dynamic Adjustments in Money Demand: An Alternative Test of Competing Hypotheses”, mimeo, Bank of Canada.  Google Scholar
  7. Feige, E. L. (1967): “Expectations and Adjustments in the Monetary Sector”, American Economic Review, Papers and Proceedings 57, 462 – 473.  Google Scholar
  8. Friedman, M. (1959): “The Demand for Money: Some Theoretical and Empirical Results”, Journal of Political Economy 67, 327 – 351.  Google Scholar
  9. Goldfeld, S. M. (1973): “The Demand for Money Revisited”, Brookings Papers on Economic Activity, 577 – 638.  Google Scholar
  10. Goldfeld, S. M. (1976): “The Case of Missing Money”, Brookings Papers on Economic Activity, 683 – 730.  Google Scholar
  11. Jonson, P. D. (1976): “Money, Prices and Output: An Intergrative Essay”, Kredit und Kapital 4, 499 – 518.  Google Scholar
  12. Jonson, P.D., Moses, E.R. and Wymer, C.R. (1977): “The RBA76 Model ofthe Australian Economy”, in Norton (ed.), Conference in Applied Economic Research (Reserve Bank of Australia, Sydney).  Google Scholar
  13. Judd, J. D. and Scadding, J. L. (1982): “Dynamic Adjustment in the Demand for Money: Tests of Alternative Hypotheses”, Federal Reserve Bank of San Francisco Economic Review, Fall, 19-30.  Google Scholar
  14. Kohli, U. (1981): “Permanent Income in the Consumption and the Demand for Money Functions”, Journal of Monetary Economics 7, 227 – 238.  Google Scholar
  15. Kohli, U. (1984a): “Permanent Prices, Expected Price Changes, and the Demand for Money”, Empirical Economics 9, 233 – 246.  Google Scholar
  16. Kohli, U. (1984b): “La demande de monnaie en Suisse”, Monnaie et conjoncture 2/4, 64 – 70.  Google Scholar
  17. Kohli, U. (1985): “Two-Stage Least Squares When the Left-Hand Variable is Exogenous”, mimeo, Swiss National Bank.  Google Scholar


Exogenous Money, Monetary (Dis)equilibrium, and Expectational Lags

This paper addresses the question of the estimation of demand-for-money functions during periods of monetary control. As David Laidler has recently pointed out, the standard approach that postulates a partial adjustment mechanism (the Chow equation) is untenable if money is exogenous. In recent years, Switzerland has adhered very closely to amonetary base target, thus leaving little doubts that money is exogenous in the Swiss case. We report estimates of Swiss demand for base money functions using alternatively the Chow formulation, various disequilibrium hypotheses (including the one favoured by Laidler), and the permanent income hypothesis. A new estimation procedure is used in some cases to allow for the exogeneity of money during part of the sample. Our results indicate that the monetary disequilibrium hypothesis is not supported by the facts. Swiss data are consistent with monetary equilibrium, and the presence of a lagged dependent variable in money demand equations can be explained by expectational lags