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The Stability of the Demand for Money Function in Germany: Myth or Reality?
Some Comments on the 1994/95 Report of the German Council of Economic Experts
Journal of Contextual Economics – Schmollers Jahrbuch, Vol. 116 (1996), Iss. 2 : pp. 185–198
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Funke, Michael
Abstract
Recent empirical work by the German Council of Economic Experts suggests that structural change in the German long run MO demand for money equation has not occurred after German unification. This evidence is based upon a somewhat arbitrary splitting of the sample period. In this note we investigate the question of structural change using procedures that let the data determine if and when structural change may have occured. Contrary to the Council of Economic Experts we find strong evidence for structural change in the cointegrating relationship following German unification.