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Part I deals with the estimation of money demand functions. Several non-structural interpretations of the conventionally estimated functions are surveyed and discussed (Chapter 1). An application to Italian data is then presented, focusing on two such interpretations. First (Chapter 2), the role of expectations in determining money demand behaviour is assessed. Since monetary policy regimes have a direct effect on the time-series properties of interest rates, the identification of clear regime changes may provide a powerful test of forward-looking models of money demand. An expectations model is constructed, which is stable in the face of the Italian monetary policy regime change in 1970, when traditional backward-looking money demand functions show remarkable instability. Second (Chapter 3), the existence of multiple long-run relations among the variables relevant to money demand is shown to create problems for the interpretation of single-equation estimates. To obtain a satisfactory specification of the long-run relations and the short-run dynamics of the system around equilibrium, a sequential procedure is devised and applied. In Part II, the controversy between "real" and "monetary" theories of fluctuations is examined (Chapter 4). A "monetary" equilibrium model of the cycle is constructed, extending the original Lucas "island" framework to allow for a powerful role for stabilization policy. The implications of alternative monetary policy regimes are derived and tested on U.S. data, comparing two periods (1922-1940 and 1952-1968) with a different policy stance. Chapter 5 investigates the relative importance of the "money" and "credit" channels of monetary transmission for Italy in the 1982-1994 period, using a structural VAR methodology. Monetary policy is effective, though not through a "credit channel", and independent disturbances to credit supply have sizeable real effects. In Chapter 6 the focus is shifted to anticipated fiscal policy actions and their effect on consumption. A long series of pre-announced income tax changes is examined for the U.K. Consumption reacts to such fiscally-induced disposable income changes only at the implementation dates.

This dissertation is a collection of three chapters on inflation dynamics and money demands. Chapter 1 tests the forward-looking New Keynesian Phillips curve using a novel panel data set for the 50 U.S. states from year 1977 to 2005. Consistent with Gali and Gertler (1999), our results support a linkage between inflation and real unit labor cost, and reject a linkage between inflation and output gap. We also address several important econometrics issues in the empricial studies. Our tests on model identification and instruments validity reveal that compared with the model with real unit labor cost, the GMM estimators in the model with output gap are more sensitive to the choice of instruments. Also, we find that the unit labor cost has stronger persistence than the output gap, and that these two variables have almost opposite dynamic cross correlations with inflation. We conclude that the observed high autocorrelation properties of U.S. inflation-as measured by the sum of AR coefficients-is well described by the forward-looking New Keynesian Phillips curve. In the second chapter, we extend the pure forward-looking New Keynesian Phillips curve to a hybrid model. We adopt a dynamic panel data model by adding a lagged inflation variable to the explanatory variables. We find relative larger weights of future inflation than the lagged inflation. This finding confirms the forward looking behavior in theory and it is also consistent with our results from the pure forward-looking model estimation. Furthermore, we obtain more evidence of dominant forward-looking behavior by using the principal components based instruments. Our results show that principal components based methods produce more precise estimates with a substantial decrease in all three estimated standard errors. We obtain more evidence of dominant forward-looking behavior across all regressions. By comparing two groups of the Kleibergen-Paap Wald F rk statistic (KP statistic), we find that using principal components is a good option to overcome the weak identifications. This finding is consistent with Bai and Ng (2010) and Kapetanios and Marcellino (2010). However, contrast with our earlier findings, in the hybrid model, the identification of the parameter of the real marginal cost becomes a problem. The third chapter investigates the long-run money demand using a panel data set for the 50 U.S. states from year 1977 to 2005. Regional heterogeneity as well as the cointegration and cross-section correlation properties of panel data are considered in great detail. Contrary to previous studies in the field, we adopt panel data techniques with nonstationary and cointegrated variables which controls for dynamics, non-stationarity, parameter heterogeneity and unobserved time-varying heterogeneity. The empirical results reveal an income elasticity close to 0.7 and an interest semi-elasticity around -0.02 and these two parameter values match closely with the empirical estimates by Ball (2001). Furthermore, it is found that the magnitude of the estimates of error correction term is much less than unity (around 0.05), which suggests that the adjustment time of U.S. money demand to return to its long-run equilibrium may be rather long. Compared to a standard homogeneous panel model of money demand function, our results obtained from heterogeneous panel model estimation indicate that the heterogeneity across states is important. It shows that the observed instability of money demand functions in aggregate U.S. studies could be explained by inappropriate aggregation across heterogeneous states. After accounting for regional heterogeneity, the estimates of income elasticity for the U.S. money demand function are clearly less than one.

The first essay explores the demand for M1, M3 and broad money (BM) and economic uncertainty in Australia over the period 1976:2-2008:4. The results suggest that we have evidence of cointegration between money, economic activity, interest rate and price for the pre-deregulation sub-period. The long-run equilibrium relation is confirmed for post-regulation and for the entire sample once we augment the traditional money demand equation with measure of economic uncertainty. Once we account for uncertainty, the breakdown of the cointegration relationship between real money balance and economic activity disappear and our money demand equation better explain the overshooting of M3 during 1984. Our result has an implication on reopening an important policy question on the viability of framing monetary policy around monetary aggregate. The second essay investigates the impact of financial liberalization on consumption and GDP growth volatility and assess why such impact may differ across countries. We have strong evidence that liberalization is associated with lower consumption growth and output growth volatility. Our result confirms that the initial level of inequality and initial level of financial development help to explain heterogeneity across countries. Countries with better financial development benefit from reduction in consumption growth variability. On the other hand, countries with high initial level of inequality do experience an increase in consumption growth volatility. Overall, after controlling for institutional quality, macroeconomic reform and conflict, our result supports the negative association between financial liberalization and consumption growth volatility in subsequent periods. One possible implication of our result is that an effort to improve financial development and promote redistribution policy that reduces the level of inequality, help countries to reap the potential benefit of liberalization. The third essay presents a two-period model of money-in-the-utility-function to investigate the impact of ant-money laundering policy on crime. Our two- period model reveals that an increase in labor wage in legal sector unambiguously decrease the labor hours allocated for illegal sector by increasing the opportunity cost for illegal activities. However, the crime-reducing impact of anti-money laundry regulation and the probability of the agent to be caught require both parameters should be above some threshold. This threshold is a function of the marginal rate of substitution of `dirty' money for consumption and the responsiveness of illegal income to the policy parameter. Higher threshold implies the need for tougher anti-money laundry regime. Therefore, the marginal rate of substitution between `dirty' money and consumption, and the elasticity of illegal income to the policy parameter are the key in governing the formulation of the anti-money laundry policy.

In the system of Taiwan, if the demand function is given, then the Central Bank can improve economic growth and steady price by controlling the money supply. In fact, true money demand is unknown, so focal point of my paper is to estimate trading money demand function of Taiwan. First, I get that real income, real M1B, and nominal rate are integrated of order 1 processes by using Augmented Dickey-Fuller test (ADF test) , Phillips-Perron test (PP test) , and Ng-Perron (NP test) . In the conventional model of Engle and Granger (1987) , I use Johansen¡¦s (1988, 1991) maximun likelihood method to estimate co-integrating vector. The result is the same with Ching-Nun Lee (1996) . In the conventional model of Engle and Granger, a linear combination of individually I(1) series becomes I(0). Series have cointegration, but their linear combination is not I(0). Therefore the conventional model of Engle and Granger does not encompass all non-stational economic models. Harris, McCabe, and Leybourne (2002) provided the stochastic cointegration. The stochastic cointegration allows that a linear combination of individually I(1) series is not I(0). Therefore, my paper also uses stochastic cointegration to test trading money demand of Taiwan. The result is real M1B, real income, and one month rate have stochastic cointegration.

The methodology is based on an application of nonlinear ESTR ECM by Kapetanios et al. (2006) to analyze the short-run dynamic adjustment to long-run equilibrium in Taiwan money demand function. We take consideration of Taiwan as a small open economy system, the exchange rate could be included in money demand function. The result indicate that using ESTR ECM to analyze the adjustment behavior of money demand function in Taiwan is better than linear ECM. Our findings point out that the public adjusts at any time for holding money and the speed of adjustment for real balances depends on the size of deviation.

Thesis (Ph. D.)--New York University, 1989. / Includes bibliographical references (leaves 165-182).

The shadow economy is a topic that has been around for many years now. The increasing regulations on cash and the endeavours public authorities made to enlarge the tax base show a clear intention from the public sector to pursue any activity that is carried out outside the borders of what is taxable. This paper uses the Currency Demand Approach (CDA) to estimate the monetary base M0 for Portugal, Italy, Greece, and Spain and for each year from 2002 to 2021 and, subsequently, calculate the size of the shadow economy as a percentage of GDP. To estimate the CDA equation, we employed fixed effects panel data regression. The results show an average shadow economy value of 9,33% for Greece; 13,43% for Italy; 10,78% for Portugal; and 11,11% for Spain. The results have also been compared with those of previous studies that have estimated the shadow economy of other countries using the MIMIC approach, showing that the CDA tends to give lower estimates. Additionally, a common trend was found for the studied countries since after the financial crisis of 2008 and 2014, all of them reached peak values in their shadow economies.

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