The Impact of Institutional Changes on the Australian Short-Run Money Demand Function
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The Impact of Institutional Changes on the Australian Short-Run Money Demand Function
Sharpe, Ian G. | Volker, Paul A.
Credit and Capital Markets – Kredit und Kapital, Vol. 12 (1979), Iss. 1 : pp. 101–120
2 Citations (CrossRef)
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Sharpe, Ian G.
Volker, Paul A.
Cited By
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Some Comments on the Stability of the Demand for Money
Jüttner, D. Johannes | Tuckwell, Roger H.Credit and Capital Markets – Kredit und Kapital, Vol. 14 (1981), Iss. 3 P.384
https://doi.org/10.3790/ccm.14.3.384 [Citations: 0] -
Financial Deregulation and the Stability of the Demand for Money in Australia
de Haan, Jakob | Zelhorst, DickCredit and Capital Markets – Kredit und Kapital, Vol. 24 (1991), Iss. 3 P.319
https://doi.org/10.3790/ccm.24.3.319 [Citations: 0]
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Abstract
The Impact of Institutional Changes on the Australian Short-Run Money Demand Function
In an earlier issue of Kredit und Kapital Jüttner and Tuckwell present estimates of the Australian short run real money demand function for the period 1952 (1) to 1972 (3). They conclude that the demand for real balances is a stable function of expectations with respect to real income, interest rates, and inflation, over this period. In Section II of the paper we describe the institutional framework through which Australian monetary policy has functioned over the last 23 decades. It is argued that the framework in the 1950’s differed significantly from that of the 1960’s, raising doubts as to the existence of a stable money demand function over the two periods. In Section III of the paper we discuss briefly some of the weaknesses of the Chow test of stability and present some tests recently developed by Brown, Durbin and Evans (1975). When these tests are applied in Section IV of the paper to Jüttner and Tuckwell’s money demand formulations all formulations are found to be unstable at the 95 per cent confidence level. In Section V we reject the possibility that the instability is due to these formulations being in real rather than in real per capita form or to the constraint that real money balances arehomogeneous of degreezeroin prices. Then in Section VI we examine the impact of various direct controls on the Australian money demand function. The evidence in this section is consistent with the hypothesis that direct controls and institutional changes have contributed to the observed instability of the money demand function and that attempts to estimate money demand functions from 1952 to the present should explicitly consider the effect of direct controls and other institutional factors.