Year: 2015
Type: article
Abstract: In this article, we test three popular versions of the monetary model (flexible price, forward-looking and real interest differential models) for the OECD member countries by applying Johansen cointegration technique. Based on country-by-country analysis, we conclude that monetary models do not provide the expected results. We reveal several shortcomings of the models and examine the building blocks of the fundamental version. Although researchers always blame the deviations from purchasing power parity as the reason for the failure of the monetary model, our analysis indicates that invalidity of Keynesian money demand function is also responsible for unfavourable results.
Source: Applied Economics
Institutions: Universitat de Barcelona, Universidad Complutense de Madrid
Language: English
Domain: Social Sciences
Open Access status: green
Funder: Universitat de Barcelona
OpenAlex ID: W2011399150