Money demand, the Cagan model, testing rational expectations vs adaptive expectations: the case of Turkey

Date
1999
Authors
Metin, K.
Muslu, I.
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Source Title
Empirical Economics
Print ISSN
0377-7332
Electronic ISSN
1435-8921
Publisher
Springer
Volume
24
Issue
3
Pages
415 - 426
Language
English
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Abstract

This paper estimates the Cagan type demand for money function for Turkish economy during the period 1986:1-1995:3 and tests whether Cagan's specification fits the Turkish data using an econometric technique assuming that forecasting errors are stationary. This paper also tests the hypothesis that monetary policy was implemented in aiming to maximize the inflation tax revenue. Finally, the Cagan model is estimated with the additional assumption of rational expectations for Turkey for the considered period.

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