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Journal of Economics and Finance

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06-05-2020

Six decades of inflation and money demand

Authors: Alexi Thompson, Henry Thompson

Published in: Journal of Economics and Finance | Issue 2/2021

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Abstract

The present estimates of dollar demand treat inflation as a separate variable in a money market model with annual data covering nearly six decades from 1960 to 2017. The difference stationary series lead to robust error correction estimates in double log differences. Structural breaks for money supply targeting in 1980 and bank bailout policy in 2009 improve the estimates. Inflation has an elastic effect on store of value and transactions demands. Rising income incompletely offsets declining dollar demand. Transactions demand appears to be especially sensitive to a decrease in inflation.

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The preliminary regressions in Tables 2, 3, and 4 are spurious but included to provide feel for the data leading to the reliable error correction estimates.

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Title: Six decades of inflation and money demand
Authors: Alexi Thompson
Henry Thompson
Publication date: 06-05-2020
Publisher: Springer US
Published in: Journal of Economics and Finance / Issue 2/2021
Print ISSN: 1055-0925
Electronic ISSN: 1938-9744
DOI: https://doi.org/10.1007/s12197-020-09510-y

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