SPLINE ESTIMATION OF THE LIQUIDITY TRAP: A COMMENT.
The article focuses on the spline estimation of the liquidity trap. In a recent note, economists James Barth, Arthur Kraft and John Kraft (BKK) used spline functions to investigate the empirical existence of the liquidity trap. A liquidity trap consists of a horizontal section of the demand for mone...
| Published in: | Review of Economics & Statistics Vol. 60; no. 2; pp. 318 - 321 |
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| Format: | Article |
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MIT Press
May78
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| Online Access: | View this record in EBSCOhost |
| fields | @attributes: recordID: 1 pdfLink: plink: https://search.ebscohost.com/login.aspx?direct=true&db=hlh&AN=4643997&site=ehost-live header: @attributes: shortDbName: hlh uiTerm: 4643997 longDbName: Humanities International Complete uiTag: AN controlInfo: bkinfo: jinfo: jid: 00346535 RMS jtl: Review of Economics & Statistics issn: 00346535 maglogo: N pubinfo: dt: May78 vid: 60 iid: 2 pid: 776 pub: MIT Press artinfo: ui: 4643997 10.2307/1924988 ppf: 318 ppct: 3 formats: tig: atl: SPLINE ESTIMATION OF THE LIQUIDITY TRAP: A COMMENT. aug: au: McCulloch, J. Huston affil: Boston College su: Spline theory Liquidity (Economics) Demand for money Monetary policy Macroeconomics Economics sug: subj: Spline theory Liquidity (Economics) Demand for money Monetary policy Macroeconomics Economics ab: The article focuses on the spline estimation of the liquidity trap. In a recent note, economists James Barth, Arthur Kraft and John Kraft (BKK) used spline functions to investigate the empirical existence of the liquidity trap. A liquidity trap consists of a horizontal section of the demand for money function, or at least a horizontal asymptote under the demand for money function, when the interest rate is placed on the vertical axis and money on the horizontal axis. They concluded that, far from rising to infinity as implied by a liquidity trap, the interest elasticity of demand for money falls off dramatically as the interest rate becomes small. While the liquidity trap is still an article of faith in Macroeconomics texts, many monetary economists now doubt its existence. Another economist has found evidence of a positive floor under the demand for money function, using the Generalized Box-Cox (GBC) function. Spline functions are even more flexible than the GBC family, so the BKK approach is a welcome addition to the literature. Unfortunately, BKK have set up their spline function in the wrong way to detect a possible liquidity trap. pubtype: Academic Journal doctype: Article src: R language: English refInfo: copyright: @attributes: flag: Y dt: @attributes: year: 1978 holdings: @attributes: islocal: N |
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