| Number |
CREPEDP-111 |
| Publication Date |
October 2021 |
| Title |
The Demand for Money at the Zero Interest Rate Bound |
| Author |
Tsutomu Watanabe and Tomoyoshi Yabu
|
| Abstract |
This paper estimates a money demand function using US data from 1980 onward, including
the recent near-zero interest rate period. We show that the substantial increase in the money-income ratio during the period of near-zero interest rates is captured well by the log-log specification, but not by the semi-log specification. Our result is the opposite of the result obtained by Ireland (2009), who found that the semi-log specification performs better. This mainly stems from the difference in the sample period employed: ours contains 24 quarters with interest rates below 1 percent, while Ireland’s (2009) sample period contains only three quarters.
|
| Keywords |
money demand function; cointegration; zero lower bound; welfare cost of inflation;
log-log form; semi-log form
|
| Other information |
Paper in English (35 pages) |