Abstract
We enter inflation uncertainty into error-correction models (EC) of US M1 and M2 money demand. We estimate the models using an instrumental variables procedure that is robust to mis-specification of inflation uncertainty. We find inflation uncertainty has a negative effect on M1 demand and a positive effect on M2 demand. Our results suggest that when confronted with increased inflation uncertainty, agents substitute away from M1 and to the interest bearing components of M2.
Full Text
Published Version
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call