International Journal of Humanities and Social Science

ISSN 2220-8488 (Print), 2221-0989 (Online)

 

Money Demand, a Microeconometric---Seminonparametric Approach: The Asymptotoically Ideal Model (AIM)
Darron Thomas

Abstract
The Asymptotically Ideal Model (AIM), first estimated by Barnett and Yue (1998), based on the Muntz-Szatz series expansion as described by Barnett and Jonas (1983), is used to estimate money demand using quarterly US data from 1960 to the first quarter of 2004. We find that monetary assets are generally substitutes and that the unitary income elasticity postulate is satisfied. Unfortunately though, we are unable to resolve the debate as to whether or not money demand is a stable process. We are also not able to test the money neutrality hypothesis in our model, but a clear way on how to do this is suggested for the purpose of future research.

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