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Determinants of Money Demand in Greece, 1966 I – 1977 IV

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  4. Vol. 17, Issue 3
  5. pp. 352–370

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Prodromidis, K. Determinants of Money Demand in Greece, 1966 I – 1977 IV. Credit and Capital Markets – Kredit und Kapital, 17(3), 352-370. https://doi.org/10.3790/ccm.17.3.352
Prodromidis, Kyprianos P. "Determinants of Money Demand in Greece, 1966 I – 1977 IV" Credit and Capital Markets – Kredit und Kapital 17.3, 1984, 352-370. https://doi.org/10.3790/ccm.17.3.352
Prodromidis, Kyprianos P. (1984): Determinants of Money Demand in Greece, 1966 I – 1977 IV, in: Credit and Capital Markets – Kredit und Kapital, vol. 17, iss. 3, 352-370, [online] https://doi.org/10.3790/ccm.17.3.352
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Determinants of Money Demand in Greece, 1966 I – 1977 IV

Prodromidis, Kyprianos P.

Credit and Capital Markets – Kredit und Kapital, Vol. 17 (1984), Iss. 3 : pp. 352–370

1 Citations (CrossRef)

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Article Details

Publisher Name
Duncker & Humblot
DOI
https://doi.org/10.3790/ccm.17.3.352
Language
Multiple languages
Pages
19

Author Details

Kyprianos P. Prodromidis, Athen

Cited By

  1. Inflationary Finance and the Demand for Money in Greece

    Tavlas, George S.

    Credit and Capital Markets – Kredit und Kapital, Vol. 20 (1987), Iss. 2 P.245

    https://doi.org/10.3790/ccm.20.2.245 [Citations: 0]

References

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  2. Boot, J. C. G., Feibes, W. and Lisman, J. H. C. (1967): Further Methods of Derivation of Quarterly Figures from Anfiual Data, Applied Statistics, 16, 65 - 75.  Google Scholar
  3. Brissimis, S. N. and Leventakis, J. A. (1981): Inflationary Expectations and the Demand for Money: The Greek Experience, Kredit und Kapital, 4, 561 - 573.  Google Scholar
  4. Chow, G. C. (1966): On the Long-Run and Short-Run Demand for Money, JPE, 74,111 - 131.  Google Scholar
  5. Darby, M.R. (1974): The Permanent Income Theory of Consumption - A Restatement, QJE, 88, 228 - 250.  Google Scholar
  6. Fase, M.M.G. and Den Butter, F. A. G. (1979): The Demand for Money in EEC Countries; Paper presented at the International Conference of Applied Econometrics, at the Banca d’Italia, Rome, February 7 - 10, 1979.  Google Scholar
  7. Friedman, M. (1956): The Quantity Theory of Money: A Restatement in M. Friedman (ed.), Studies in the Quantity Theory of Money, Chicago, University of Chicago.  Google Scholar
  8. Friedman, M. (1957): A Theory of the Consumption Function, Princeton, Princeton University Press.  Google Scholar
  9. Friedman, M. (1959): The Demand for Money: Some Theoretical and Empirical Results, JPE, 67, 327 - 351.  Google Scholar
  10. Friedman, M. and Schwartz, A. J. (1963): Money and Business Cycles, in M. Friedman (1969) (ed.), The Optimum Quantity of Money and Other Essays, Chicago, Aldine Publishing Company.  Google Scholar
  11. Goldberger, A. S. (1964): Econometric Theory, New York, John Wiley and Sons, Inc.  Google Scholar
  12. Goldfeld, S. (1973): The Demand for Money Revisited, Brookings Paper on Economic Activity, 3, 577 - 638. - Goldfeld, S. (1976): The Case of the Missing Money, Brookings Papers on Economic Activity, 3, 638 - 739.  Google Scholar
  13. Hacche, G. (1974): The Demand for Money in the United Kingdom: Experience since 1971, The Bank of England Quarterly Bulletin, Sept. 284 - 305.  Google Scholar
  14. Johnston, J. (1972): Econometric Methods, 2nd ed., New York, McGraw Hill, Book Company.  Google Scholar
  15. Kmenta, J. (1971): Elements of Econometrics, The Macmillan Co., New York.  Google Scholar
  16. Laumas, G. S. (1979): The Stability of the Demand for Money by the  Google Scholar
  17. Household Sector - A Note, Southern Economic Journal, 46, 603 - 608.  Google Scholar
  18. Lybeck, J. A. (1975): Issues in the Theory of the Long-run Demand for Money, Swedish Journal of Economics, 77,193 - 206.  Google Scholar
  19. Price, L. (1972): The Demand för Money in the United Kingdom: A Further Investigation, Bank of England Quarterly Bulletin, March, 43 - 55.  Google Scholar
  20. Prodromidis, K. P. and Dimitriadou, C. (1975): On Professor Friedman’s Demand for Money Function, Zeitschrift für die Gesamte Staatswissenschaft, 131, 318 - 328.  Google Scholar
  21. Prodromidis, K. P. and Dimitriadou-Kotsikou (1980): The Demand for Money in Greece: An Econometric Analysis with Quarterly Data, Athens, Center of Planning and Econ. Research (in Greek).  Google Scholar
  22. Starleaf, D. R. (1970): The Specification of Money Demand-Supply Models which Involve the Use of Distributed Lags, Journal of Finance, 25, 743 - 760.  Google Scholar
  23. Al-Khuri, S. and Nsouli, M. (1978): The Speed of Adjustment of the Actual to the Desired Money Stock, European Economic Review, 11, 181 – 206.  Google Scholar
  24. Boot, J. C. G., Feibes, W. and Lisman, J. H. C. (1967): Further Methods of Derivation of Quarterly Figures from Anfiual Data, Applied Statistics, 16, 65 – 75.  Google Scholar
  25. Brissimis, S. N. and Leventakis, J. A. (1981): Inflationary Expectations and the Demand for Money: The Greek Experience, Kredit und Kapital, 4, 561 – 573.  Google Scholar
  26. Chow, G. C. (1966): On the Long-Run and Short-Run Demand for Money, JPE, 74,111 – 131.  Google Scholar
  27. Darby, M.R. (1974): The Permanent Income Theory of Consumption – A Restatement, QJE, 88, 228 – 250.  Google Scholar
  28. Fase, M.M.G. and Den Butter, F. A. G. (1979): The Demand for Money in EEC Countries; Paper presented at the International Conference of Applied Econometrics, at the Banca d’Italia, Rome, February 7 – 10, 1979.  Google Scholar
  29. Friedman, M. (1956): The Quantity Theory of Money: A Restatement in M. Friedman (ed.), Studies in the Quantity Theory of Money, Chicago, University of Chicago.  Google Scholar
  30. Friedman, M. (1957): A Theory of the Consumption Function, Princeton, Princeton University Press.  Google Scholar
  31. Friedman, M. (1959): The Demand for Money: Some Theoretical and Empirical Results, JPE, 67, 327 – 351.  Google Scholar
  32. Friedman, M. and Schwartz, A. J. (1963): Money and Business Cycles, in M. Friedman (1969) (ed.), The Optimum Quantity of Money and Other Essays, Chicago, Aldine Publishing Company.  Google Scholar
  33. Goldberger, A. S. (1964): Econometric Theory, New York, John Wiley and Sons, Inc.  Google Scholar
  34. Goldfeld, S. (1973): The Demand for Money Revisited, Brookings Paper on Economic Activity, 3, 577 – 638. – Goldfeld, S. (1976): The Case of the Missing Money, Brookings Papers on Economic Activity, 3, 638 – 739.  Google Scholar
  35. Hacche, G. (1974): The Demand for Money in the United Kingdom: Experience since 1971, The Bank of England Quarterly Bulletin, Sept. 284 – 305.  Google Scholar
  36. Johnston, J. (1972): Econometric Methods, 2nd ed., New York, McGraw Hill, Book Company.  Google Scholar
  37. Kmenta, J. (1971): Elements of Econometrics, The Macmillan Co., New York.  Google Scholar
  38. Laumas, G. S. (1979): The Stability of the Demand for Money by the  Google Scholar
  39. Household Sector – A Note, Southern Economic Journal, 46, 603 – 608.  Google Scholar
  40. Lybeck, J. A. (1975): Issues in the Theory of the Long-run Demand for Money, Swedish Journal of Economics, 77,193 – 206.  Google Scholar
  41. Price, L. (1972): The Demand för Money in the United Kingdom: A Further Investigation, Bank of England Quarterly Bulletin, March, 43 – 55.  Google Scholar
  42. Prodromidis, K. P. and Dimitriadou, C. (1975): On Professor Friedman’s Demand for Money Function, Zeitschrift für die Gesamte Staatswissenschaft, 131, 318 – 328.  Google Scholar
  43. Prodromidis, K. P. and Dimitriadou-Kotsikou (1980): The Demand for Money in Greece: An Econometric Analysis with Quarterly Data, Athens, Center of Planning and Econ. Research (in Greek).  Google Scholar
  44. Starleaf, D. R. (1970): The Specification of Money Demand-Supply Models which Involve the Use of Distributed Lags, Journal of Finance, 25, 743 – 760.  Google Scholar

Abstract

Determinants of Money Demand in Greece, 1966 I – 1977 IV

In this paper we examined the determinants of money demand in Greece. The paper consisted of a theoretical and an empirical part. In the theoretical part, we distinguished between the short-run and the long-run money demand equations and introduced an adjustment mechanism linking these two expressions. According to this mechanisms, the observable change in money stock was explained by two terms: the difference between actual and desired real cash balances in time period t – 1, and the change in the desired real cash balances from time period t — 1 to time period t. The arguments entering in the long- as well as in the short-run money demand equations were: permanent income, the rate of interest and the rate of change of the general price level. The empirical analysis was based on a sample of forty-eight quarterly observations covering the period 1966 I- 1977 IV, and utilized quarterly data going back to 1958 II for the formation of the necessary observations of the permanent variables. Thirty-two observations of a measured variable were needed to make one observation of a permanent variable. In the empirical part of the paper we tested for the stability as well as for the homogeneity of the long-run money demand equation in relation to prices. The results suggest that the demand for nominal cash balances in Greece was homogeneous to the first degree to prices (permanent or measured). However, the long-run demand function for real permanent (desired) money stock was unstable during the 1972 II to 1974 II period. The long-run elasticity estimates of real permanent money withrespect to real permanent income, the rate of interest and the rate of change of permanent prices were around 1.80 1.9, – 0.15 and – 0.11, respectively. Furthermore, the coefficients of the adjustment mechanism introduced in the paper were estimated to about 0.9 and 0.25, respectively. This finding suggests that, in the 1966 I- 1977 IV period, the relative change in the observable real money stock in Greece was explained mainly by the relative change in desired real cash balances, and in part by the relative change in the gap between the desired and measured real money stock of the preceding quarter. Finally, forecasts made for the first two quarters outside the sample period were satisfactory. The root mean square errors of the forecasts were less than one percent.

Table of Contents

Section Title Page Action Price
Kyprianos P. Prodromidis: Determinants of Money Demand in Greece, 1966 I - 1977 IV 352
I. Introduction 352
II. The Model 352
1. The Adjustment Mechanism 353
2. The Long-run Equation 354
3. The Short-run Equation 354
III. The Data 355
IV. Empirical Analysis 356
1. Estimation of the Long-run Demand for Money Functions 357
2. Estimation of the Short-run Demand for Money Function 363
Appendix 366
References 367
Zusammenfassung: Determinanten der Geldnachfrage in Griechenland, 1966 I - 1977 IV 368
Summary: Determinants of Money Demand in Greece, 1966 I - 1977 IV 368
Résumé: Déterminantes de la demande monétaire en Grèce, 1966 I - 1977 IV 369

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