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- Title
INTERNATIONAL PRICE BEHAVIOR AND THE DEMAND FOR MONEY.
- Authors
Gandolfi, Arthur E.; Lothian, James R.
- Abstract
Oil prices, commodity prices and American monetary policy, the last operating through a variety of channels, have all figured prominently in explanations of the international inflation process in the late 1960s and early '70s. Our major purpose in this paper is to test these various hypotheses.We do so in the context of a reduced-form rational-expectations price equation which we estimate for the United States and seven other industrial countries using quarterly data for the period 1955 through 1976. The principal conclusion that emerges from this exercise is that movementsin domestic money in these countries served as the key link in the inflation process. The factors that produced these monetary changes, however, differed among countries. Price shocks of various sorts were dearly of secondary importance. The other important set of conclusions concerns the demand for money. In place of a traditional stock adjustment model, we used GLS with a second-order correction for autocorrelation. We believe this produced more plausible estimates of the parameters of the long-run demand function and of the adjustment process itself.
- Subjects
DEMAND for money; AUTOCORRELATION (Statistics); DEMAND function
- Publication
Economic Inquiry, 1983, Vol 21, Issue 3, p295
- ISSN
0095-2583
- Publication type
Article
- DOI
10.1111/j.1465-7295.1983.tb00633.x