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The Interest Elasticity of Money Demand: A Meta-Analysis
Slouková, Eliška ; Havránek, Tomáš (advisor) ; Holub, Tomáš (referee)
Even though precise evaluation of money demand function is essential for cen- tral banking and for the right determination of the transmission mechanism, economists have not reached a consensus about the underlying determinants of money demand function neither their magnitude and direction. Researchers differ even in the selection of measures used for the main variables - income, and interest rate. While the heterogeneity in elasticity estimates of the former one has been scrutinize in several quantitative surveys, to the best of our knowledge, there has not been compiled any meta-analysis focusing on differences among the interest rate elasticities of the money demand. Therefore, we collected 53 studies reporting 1 094 estimates of interest rate elasticity. Implementing both the state-of-the-art methods and those proposed only recently, we have found out that researches are prone to selective reporting. Firstly, our results shows that negative publication bias is present in empirical studies of the money de- mand and increases the average elasticity estimate approximately three times (in absolute terms). Secondly, negative highly precise estimates are more likely to be compared to their imprecise counterparts. Additionally, we scrutinize po- tential sources of heterogeneity among individual...
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Income Elasticity of Money Demand: A Meta-Analysis
Sedlaříková, Jana ; Havránek, Tomáš (advisor) ; Šopov, Boril (referee)
The income elasticity of money demand represents an important economic variable which affects money demand function. Precise evaluation of money demand is important for central banking and for determining the transmission mechanism. Nevertheless, there is no general agreement on the exact structure of the function of money demand and income elasticity values neither in theoretical nor practical context. Many different economic theories concerning this field were developed by various economists during the 20th century. There was also a large amount of empirical research whose goal was to estimate the value of income elasticity based on real economic data. However, these studies are characterized by strong heterogeneity of the respective results. The method of meta-analysis is considered to be an effective statistical instrument that allows systematic evaluation of these inconsistent estimates. This method was applied to the dataset consisting of 985 empirical estimates from more than 70 primary studies. The publication selection bias was detected only in the case of using broad monetary aggregates. The resulting estimates adjusted for publication bias range from 0.784 for narrow monetary aggregates to 0.93 for the broadly defined money. In addition, meta- regression analysis revealed correlation...
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