STRUCTURAL BREAKS DAN KETIDAKSTABILAN PERMINTAAN UANG DI INDONESIA

This research aims to identify the sources of instability of the money demand function (M1 and M2) due to structural changes that occur as a result of economic shocks. These shocks are technically shown by the presence of structural breaks in the data and can lead the parameters non-constancy. The instability of the money demand function was analyzed using the Gregory and Hansen test. The source of instability of the money demand was identified using time varying parameter model. This research used quarterly time series data from 1993Q1 to 2013Q4. The results show that the money demand function (M1 dan M2) is not cointegrated (unstable) and the source of the instability is exchange rate variable. Keywords: Stability money demand, Structural breaks, Time varying parameter model

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Structural Breaks dan Ketidakstabilan Permintaan Uang di Indonesia

Jurnal Ekonomi dan Pembangunan Indonesia ◽

10.21002/jepi.v17i2.715 ◽

2017 ◽

Vol 17 (2) ◽

pp. 169-183

Author(s):

Deviyantini Deviyantini ◽

Iman Sugema ◽

Tony Irawan

Keyword(s):

Time Series ◽

Exchange Rate ◽

Interest Rate ◽

Money Demand ◽

Structural Breaks ◽

Demand Function ◽

Series Data ◽

Time Varying ◽

Money Demand Function ◽

Time Varying Parameter

Structural Breaks and Instability of Money Demand in IndonesiaThis research aims to identify the sources of instability of the money demand function (M1 and M2) due to structural changes that occur as a result of economic shocks. These shocks, are technically shown by the presence of structural breaks in the data and can lead the parameters non-constancy. The instability of the money demand function was analyzed using the Gregory and Hansen test. The source of instability of the money demand was identified using time varying parameter model. This research used quarterly time series data from 1993Q1 to 2013Q4. The result of Gregory and Hansen test indicates there is no long term equilibrium between variables (money demand, income, domestic interest rate, foreign interest rate, exchange rate, and inflation) in the model, neither M1 nor M2 model. On the other word, money demand function is unstable. The source of the instability is exchange rate variable.Keywords: Stability Money Demand; Structural Breaks; Time Varying Parameter ModelAbstrakPenelitian ini bertujuan untuk mengidentifikasi sumber-sumber ketidakstabilan fungsi permintaan uang (M1 dan M2) akibat dari perubahan struktural yang terjadi karena adanya guncangan ekonomi. Guncangan tersebut, yang secara teknis ditunjukkan oleh keberadaan structural breaks di dalam data, dapat menyebabkan parameter menjadi tidak konstan. Ketidakstabilan fungsi permintaan uang dianalisis dengan menggunakan Gregory and Hansen test. Sumber ketidakstabilan dari permintaan uang diidentifikasi dengan menggunakan time varying parameter model. Penelitian ini menggunakan data time series dalam bentuk kuartalan dari 1993Q1 sampai 2013Q4. Hasil Gregory and Hansen test menunjukkan bahwa tidak ada keseimbangan jangka panjang di antara variabel-variabel (permintaan uang, pendapatan, suku bunga domestik, suku bunga luar negeri, nilai tukar, dan inflasi) di dalam model, baik pada model M1 maupun M2. Dengan kata lain, fungsi permintaan uang tidak stabil. Sumber ketidakstabilan tersebut berasal dari variabel nilai tukar.

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Financial Liberalization and the Stability of Short-run and Long-run Money Demand in Iran

Journal of Economics and Behavioral Studies ◽

10.22610/jebs.v5i1.377 ◽

2013 ◽

Vol 5 (1) ◽

pp. 24-37

Author(s):

Maryam Zare

Keyword(s):

Money Demand ◽

Structural Breaks ◽

Structural Changes ◽

Financial Liberalization ◽

Time Series Data ◽

Structural Break ◽

Unit Root Test ◽

Series Data ◽

Long Run ◽

Demand Stability

Money demand is one of the most important macro-economic variables that could be of great importance to the economic prospect of a country. Therefore, awareness on how this function behaves and by adoption of appropriate economic policies, it is possible, by and large, to avoid the emergence of disorder. The present study, employing the annual time series data related to Iranian economy during 1973-2009, tries to investigate possible relationships between financial liberalization and money demand stability in Iran, in the form of 4 models. To do so, Zivot-Andrews (1992) Unit Root Test was applied in order to clarify endogenous structural changes and Gregory-Hansen (1996) Cointegration Test was administered to investigate the long-run relationships between financial liberalization and money demand stability in Iran, with an emphasis on the structural breaks during the period under study. The results of the study show that by taking the structural break into consideration, there is a significant short and long run relationship between financial liberalization and money demand stability in Iran.

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An Analysis of the Money Demand Function for Zambia: A Gregory Hansen Cointegration Approach

Journal of Economics and Behavioral Studies ◽

10.22610/jebs.v13i1(j).3050 ◽

2021 ◽

Vol 13 (1(J)) ◽

pp. 1-12

Author(s):

Peter Nsokolo Mumba ◽

Emmanuel Ziramba

Keyword(s):

Money Demand ◽

Demand Function ◽

Time Series Data ◽

Series Data ◽

Level Shift ◽

Money Demand Function ◽

Real Money ◽

Long Run ◽

Parsimonious Model ◽

The Stability

The objective of this study was to analyze the money demand function for Zambia for the period 1978 – 2018 using annual time series data. The study employed the Gregory Hansen cointegration technique. The study also employed Hendry’s General to Specific technique to estimate the error correction model by obtaining a parsimonious model. The results of the Gregory Hansen test confirmed the presence of a cointegrating relationship and selected the GH-2 model as the most plausible model with a level shift and a trend. The results also endogenously determined 1994 as the break year in the money demand function. Other interesting results obtained by the study suggest that inflation and interest rate are the robust determinants of real money demand both in the short and long run. Furthermore, unlike many other developing countries, the results show that money is a necessity in Zambia. The other interesting results suggested by the study are that the financial sector reforms of 1994 diminished the demand for real money; however, the positive time trend suggests that there has been an increase in real money holdings over time in Zambia. The low-interest elasticity of money demand also potentially compromises the effectiveness of money supply as a monetary policy tool for economic stabilization. The results of the CUSUM and CUSUMSQ confirm the stability of the money demand function in Zambia.

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Endogenous Structural Breaks and the Stability of the Money Demand Function in Saudi Arabia

International Journal of Economics and Finance ◽

10.5539/ijef.v6n1p155 ◽

2013 ◽

Vol 6 (1) ◽

Cited By ~ 1

Author(s):

Waheed Abdulrahman Banafea

Keyword(s):

Saudi Arabia ◽

Money Demand ◽

Structural Breaks ◽

Demand Function ◽

Money Demand Function ◽

The Stability ◽

Endogenous Structural Breaks

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DETECTING FOR SMOOTH STRUCTURAL CHANGES IN GARCH MODELS

Econometric Theory ◽

10.1017/s0266466614000942 ◽

2015 ◽

Vol 32 (3) ◽

pp. 740-791 ◽

Cited By ~ 5

Author(s):

Bin Chen ◽

Yongmiao Hong

Keyword(s):

Structural Breaks ◽

Structural Changes ◽

Garch Model ◽

Parametric Bootstrap ◽

Garch Models ◽

Time Varying ◽

Finite Samples ◽

Time Varying Parameter ◽

Break Points ◽

Quasi Maximum Likelihood

Detecting and modeling structural changes in GARCH processes have attracted increasing attention in time series econometrics. In this paper, we propose a new approach to testing structural changes in GARCH models. The idea is to compare the log likelihood of a time-varying parameter GARCH model with that of a constant parameter GARCH model, where the time-varying GARCH parameters are estimated by a local quasi-maximum likelihood estimator (QMLE) and the constant GARCH parameters are estimated by a standard QMLE. The test does not require any prior information about the alternatives of structural changes. It has an asymptotic N(0,1) distribution under the null hypothesis of parameter constancy and is consistent against a vast class of smooth structural changes as well as abrupt structural breaks with possibly unknown break points. A consistent parametric bootstrap is employed to provide a reliable inference in finite samples and a simulation study highlights the merits of our test.

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Structural changes and the US money demand function

Applied Economics ◽

10.1080/00036840601007385 ◽

2009 ◽

Vol 41 (10) ◽

pp. 1251-1257 ◽

Cited By ~ 10

Author(s):

Kyongwook Choi ◽

Chulho Jung

Keyword(s):

Money Demand ◽

Structural Changes ◽

Demand Function ◽

Money Demand Function ◽

The Us

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Structural Breaks, Stability and Demand for Money in South Africa

Journal of Economics and Behavioral Studies ◽

10.22610/jebs.v7i5(j).608 ◽

2015 ◽

Vol 7 (5(J)) ◽

pp. 79-90

Author(s):

Sambulo Malumisa

Keyword(s):

South Africa ◽

Money Demand ◽

Structural Breaks ◽

Demand Function ◽

Money Demand Function ◽

Correction Model ◽

Cointegrating Vector ◽

Long Run ◽

Maximum Likelihood Procedure ◽

Policy Shifts

The paper tests the null hypothesis of a stable long-run money demand in South Africa over the period 1970-2013. We employ the Gregory-Hansen (GH) method to test for the possibility of structural breaks in the money demand function. The Johansen Maximum likelihood procedure is carried out to determine the cointegration vector from which existence of one cointegrating vector is supported. Also based on the GH criterion, there is existence of one cointegrating vector. GH proposes three structural breaks for the money demand function. Results suggest that endogenous breaks occurred in 1991 and 1994. The GH cointegration equations reject M1 whilst M2 and M3 pass and we proceed to estimate the error-correction model. Complemented by the CUSUM and CUSUM of squares, the tests carried out suggest that monetary policy shifts did not introduce instability.

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FINANCIAL CYCLES IN THE ECONOMY AND IN ECONOMIC RESEARCH: A CASE STUDY IN CHINA

Technological and Economic Development of Economy ◽

10.3846/tede.2021.15439 ◽

2021 ◽

Vol 27 (5) ◽

pp. 1250-1279

Author(s):

Yong Qin ◽

Zeshui Xu ◽

Xinxin Wang ◽

Marinko Škare ◽

Małgorzata Porada-Rochoń

Keyword(s):

Time Series Data ◽

Singular Spectrum Analysis ◽

Real Life ◽

Economic Research ◽

Series Data ◽

Time Varying ◽

Causality Test ◽

Vector Autoregression Model ◽

Time Varying Parameter ◽

Financial Cycles

This work explores the relationship between financial cycles in the economy and in economic research. To this aim, we take China as an empirical example, and an intuitive bibliometric analysis of selected terms concerning financial cycles in economic research is performed first. Both in the economy and in economic research, we then conduct singular spectrum analysis to further isolate and describe the specific length and amplitude of financial cycles for China based on quarterly time-series data. Finally, according to the estimated cycles that detrended by Hodrick-Prescott filter for financial and bibliometric variables, the Granger causality test scrutinizes the results of the first two steps. Moreover, a time-varying parameter vector autoregression model is estimated to quantitatively investigate the time-varying interaction between financial and bibliometric variables. Our study shows that financial cycles have a strong effect on the developments in the financial-related literature. In particular, the 2008 global financial crisis’s impulse intensity is significantly higher than in other periods. Surprisingly, discussions on financial cycles in the literature also have an impact on financial activities in real life. These findings contribute to nascent work on the patterns in financial cycles, thus providing a new and effective insight on the interpretation of financial activities.

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Money Demand in a Dollarized Economy: Evidence from Laos PDR

Asian Economic Papers ◽

10.1162/asep_a_00663 ◽

2019 ◽

Vol 18 (1) ◽

pp. 99-115

Author(s):

Phouphet Kyophilavong ◽

Gazi Salah Uddin ◽

Muhammad Shahbaz ◽

Charles Harvie ◽

Teerawat Charoenrat

Keyword(s):

Exchange Rate ◽

Money Demand ◽

Structural Breaks ◽

Demand Function ◽

Correction Method ◽

Causality Analysis ◽

Bounds Testing ◽

Money Demand Function ◽

Distributed Lag ◽

The Exchange Rate

This paper uses a time series perspective to examine the determinants and stability of the money demand function in the case of Laos PDR. An autoregressive distributed lag bounds testing approach to cointegration in the presence of structural breaks and Granger causality in a vector error correction method framework are applied to data covering the period 1992:Q1 to 2013:Q4. The results indicate that the money demand function is stable when exchange rate fluctuations are incorporated, and the causality analysis reveals that there is a feedback effect between money demand and the exchange rate in the long run. This implies that the exchange rate plays an important role in influencing money demand in the case of a dollarized economy such as that of Laos.

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